Reference no: EM132915597
Question - On January 1, 2019, ABC Ltd. started a defined benefit pension plan that granted benefits to its 50 employees for past services rendered in the years prior to the adoption of the pension plan at the beginning of this year. The total expected service-years (EARSL) of the 50 employees is 12 yrs. An actuary has calculated that the present value of the past service amount to be recorded in the accrued benefit obligation (ABO) on January 1, 2019, to be $3,000,000cr.
On December 31, 2019, the following additional information was provided concerning the pension plan's operations for the first year:
Fair value of plan assets, January 1, 2019 $100,000dr
Expected return on plan assets 5%
Interest rate for ABO 5%
Employer's contribution, made on 1st day of current year $700,000
Current Service cost, earned end of year 500,000
Past service amount, increased in ABO, at beginning of year 3,000,000
Amortization of actuarial net gains (cr) on ABO 24,000cr
What would the pension expense be that ABC should recognize in 2019? Assuming the past service cost (PSC) set up on January 1, 2019, will be amortized over the expected average remaining service life of the employees.
What would the journal entry to reflect the accounting for the company's pension plan for 2019 for the above be?
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