Question: Lacy Construction has a noncontributory, defined benefit pension plan. At December 31, 2011, Lacy received the following information:
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Projected Benefit Obligation
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($ in millions)
|
|
Balance, January 1
|
$360
|
|
Service cost
|
60
|
|
Interest cost
|
36
|
|
Benefits paid
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(27)
|
|
Balance, December 31
|
$429
|
|
Plan Assets
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($ in millions)
|
|
Balance, January 1
|
$240
|
|
Actual return on plan assets
|
27
|
|
Contributions 2011
|
60
|
|
Benefits paid
|
(27)
|
|
Balance, December 31
|
$300
|
The expected long-term rate of return on plan assets was 10%. There were no AOCI balances related to pensions on January 1, 2011. At the end of 2011, Lacy amended the pension formula creating a prior service cost of $12 million, one-third of which is related to employees whose pension benefits have vested.
Assume Lacy Construction prepares its financial statements according to International Accounting Standards.
Required:
(1) Determine Lacy's pension expense for 2011.
(2) Prepare the journal entry(s) to record Lacy's pension expense, gains or losses, prior service cost, funding, and payment of retiree benefits for 2011.