Electronic Distribution has a

Electronic Distribution has a defined benefit pension plan.Characteristics of the plan during 2021 are as follows:

($ millions)
PBO balance, January 1 $ 640
Plan assets balance, January 1 500
Service cost 105
Interest cost 85
Gain from change in actuarial assumption 36
Benefits paid (68 )
Actual return on plan assets 47
Contributions 2021 95

The expected long-term rate of return on plan assets was 10%. Therewere no AOCI balances related to pensions on January 1, 2021, butat the end of 2021, the company amended the pension formula,creating a prior service cost of $20 million. (Enter youranswers in millions (i.e., 10,000,000 should be entered as10).)Required:

1. Calculate the pension expense for2021.2. Prepare the journal entries to record (a)pension expense, (b) gains or losses, (c) prior service cost, (d)funding, and (e) payment of benefits for 2021.3. What amount will Electronic Distribution reportin its 2021 balance sheet as a net pension asset or net pensionliability?


1) The pension expense for 2021 is calculated asfollows:

Service Cost 105
Interest Cost 85
Expected Return on Planassets ($500 *10%) (50)
Amortization of priorservice cost
Pensionexpense $140

2) Journal entries are as follows:

No. Account and Explanation Debit($) Credit($)
(a) Pension Expenses 140
Plan Assets ($500 *10%) 50
Projected Benefit Obligation (PBO)(105+85) 190
(Recorded the Pension Expenses )
(b) 1) Projected Benefit Obligation (PBO) 36
Gain – OCI 36
(Recorded the gain – OCI)
(b) 2) Loss – OCI ($500 *10%) – $47 3
Plan Asset 3
(Recorded the Loss – OCI)
(c) Prior service cost – OCI 20
Projected Benefit Obligation (PBO) 20
(Recorded the Prior service cost )
(d) Plan Asset 95
Cash 95
(Recorded the funding )
(e) Projected Benefit Obligation (PBO) 68
  Plan Asset 68
(Recorded the benefits paid)

3) An amount that Electronic Distribution report will inits 2021 balance sheet as a net pension asset or net pensionliability is calculated as follows:

a) Net pension asset :

($ millions)
Plan Asset Balance, January1 500
Actual Return in PlanAssets 47
Contributions (68)
Benefits Paid 95
Plan Asset Balance, December 31 574

b) Net pension liability:

Projected BenefitObligation (PBO), January 1 640
Service Cost 105
Interest Cost 85
Gain from change inactuarial assumption (36)
Prior Service Cost 20
Benefit Paid ( 68)
Projected BenefitObligation (PBO),December 31 746
Plan Asset Balance, December 31 (574)
Net pensionLiability $172

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