Prior service cost; calculate pension expense; journal entries; determine net pension asset or liability
Response to the following problem:
Electronic Distribution has a defined benefit pension plan. Characteristics of the plan during 2016 are as follows:
($ millions):
PBO balance, January 1 $480
Plan assets balance, January 1 300
Service cost 75
Interest cost 45
Gain from change in actuarial assumption 22
Benefits paid (36)
Actual return on plan assets 20
Contributions 2016 60
The expected long-term rate of return on plan assets was 8%. There were no AOCI balances related to pensions on January 1, 2016, but at the end of 2016, the company amended the pension formula creating a prior service cost of $12 million.
Required:
1. Calculate the pension expense for 2016.
2. Prepare the journal entry to record pension expense, gains or losses, prior service cost, funding, and payment of benefits for 2016.
3. What amount will Electronic Distribution report in its 2016 balance sheet as a net pension asset or net pension liability?