Hello, and welcome to this session in which we would learn how to use a pension worksheet to compute pension expense. Pension expense is composed of five components, service costs for the year, amortization of a prior service cost, interest liability, actual return on plan asset gain slash loss. In the prior session, we looked at each one of those components. I'm going to go over them briefly because to compute the pension expense, we're going to be using a tool called the pension worksheet. So you won't understand what each one of these components represent. So briefly, I'm going to go over the one that I'm going to be using in this example. Starting with service cost for the year. What is service cost for the year? Service cost increases pension expense. Why? Service costs represent the amount of expense you incurred this period because the employee put an additional year of service. So for every year or for every time the employee worked for a day, two, week, a year, we assume it's a year, what's going to happen? It's going to increase your pension expense. And by increasing your pension expense, if you're not paying it, you're increasing also your liability. We're not going to talk about amortization of a prior service cost because I'm not going to be using this in this example. Interest on liability. Remember we have something called PBO, projected benefit obligation. The obligation is a liability. It's a long-term liability and all liabilities will incur interest. So we have to account for the interest. Any interest cost is added to the pension expense, therefore notice the plus. Actual return on plan asset. Now we're going to be using the actual return later on. We'll learn about the expected return. The actual return on plan asset is a negative. It's going to reduce your pension expense. Now remember you have a projected benefit obligation, but you also have plan assets. Plan assets are assets. Those assets include stocks, bonds, investments, various types of investments. Those investments will earn you dividend, interest, capital gains, and capital losses. As a result, when they do those earnings, when they earn the actual return, they're going to reduce your pension expense because they are contributing to your plan asset. Then we're going to have something called gain slash losses. They could be an increase or a decrease. We will not even be using them in this example because we're going to have a whole session about what do we need to do with gains slash losses when it comes to pension expense. So those are the five components of a pension expense and this is basically a quick review. In this session, we're going to be working with a pension worksheet to see how this whole picture fits together. To do so, we have to work an example. On January 1, X1, Adam company provides the following information related to expansion plan for the year 20X1. They started the year with a plan asset of 200,000. Well what does that mean? It means they have assets of 200,000. Now how does the plan asset fits into this pension worksheet? Let's take a look at the pension worksheet. The pension worksheet will have an item, which is a list of the item that you are dealing with. You will keep track of what increases, decreases your pension expense. If you paid any cash or received cash, you're going to be paying cash. A section called OCI, other comprehensive income, which will have a prior service cost and gains and losses, which I will not use for the sake of this example. And the reason is this. When I introduce a new topic, I prefer to start easy, simple, show you what a pension worksheet is in a simple example. Then in the next example, I will add the prior service cost. I will add gains and losses. So it's easier for you as a student to follow with me. Then we'll have what's called the pension asset slash liability. It could be an asset, could be a liability. And those will represent my journal, actually the right here. Those would represent my general journal entries. Also the company will keep track of their obligation through the PBO and they will keep track of their plan asset. So for this example, we have plan asset of 200,000. That's fine. The year we have plan, we have PBO of 200,000. We have projected benefit obligation of 200,000. We have plan assets of 200,000. If I ask you, is the plan overfunded or underfunded? The plan is fully funded. It's not overfunded. It's not underfunded. Why? Because those two are equal to each other. If we have more plan assets, then projected benefit obligation, then we are overfunded. It means we have more. Let's assume we have 250,000 in assets. On the other side, if we have less assets than projected benefit obligation, we are underfunded. Let's assume we have 250,000 of liabilities while we have 200,000 of assets. So you want to make sure when is the plan overfunded or underfunded. Those questions will appear on the exam. And you will service cost is 11,000. It means for this year, the employee earned 11,000. What would that do? That will increase my pension expense. Settlement rate is 5%. I'm going to be using the settlement rate to compute my interest cost for this example, for this pension obligation. My actual return on plan asset is 12,000, which is good. It might represent dividend interest, so on and so forth. My funding contribution are $8,000. It means I contributed to the plan. I wrote a check. This is the company. I wrote a check for $8,000. Benefit paid to retirees during the year, $6,000. It means the company, it means not the company, not the company that's employing the employees. It's the pension plan trustee. The bank, the financial institution paid $6,000 to our retirees. Now we're going to take a look and see how all these figures fit in the pension worksheet in order to prepare the journal entry that relate to the pension expense. Before we proceed any further and prepare the journal entry, please take a look at my website farhatlectures.com. Whether you are an accounting student or a CPA candidate, I provide lectures, multiple choice through false. The reason you're watching is because you are looking for some help and I can help you. Access my material. It will help you. It will provide you additional resources. Invest in yourself. Don't shortchange yourself. Accounting is an important. It will pay you dividend down the road. Invest in yourself. Also connect with me on LinkedIn. Like this recording. If you're watching and you are benefiting, please like it. It's not going to cost you anything. It will help others. Share it with others. Connect with me on Instagram, Facebook, Twitter, Reddit. So let's start. The first item was the balances. So the balances were giving us $200,000 and $200,000. Those were part of the memo. Keep in track of the PBL and keep in track of the plan asset. Service cost for the year was $11,000. Well this is going to increase your pension expense and it's going to be added. Notice this is a negative but this is a negative adding to a negative. Basically you owe now $11,000. Your PBL is increasing. Your interest cost is $10,000 which is your PBL times the settlement rate of 5%. That's going to increase your pension expense and that's going to increase your PBL because part of your PBL is interest. It's a liability. Long-term liability. Actual return. The actual return for this example is $12,000. Therefore it's going to reduce your annual pension expense because the dividend, the interest that you received on those plan investment that you received on those plan investment they're going to increase your plan investment and help in your interest expense means reduce your interest expense. Contribution. Now the company wrote a check to the plan asset. So they wrote a check to the first pension plan of America, $8,000. You reduce our cash $8,000 and that $8,000 will increase the plan assets. Then benefit paid $6,000. So notice this benefit paid does not affect the journal entry. As I told you those benefit paid are paid from the company that's administering the pension plan which could be a bank, a financial institution. As a result we are going to reduce our PBL because we paid $6,000 of our obligation and we are going to reduce our plan asset because we paid out of our plan asset. Now if my math is right, if I net those out my pension expense will be $9,000 for this period. My cash I paid $8,000, hold on a second. I have an expense of $8,000. I funded $8,000 out of it. What does that mean? It means I still owe $1,000. Therefore we're going to see the entry on the next slide. I am going to have increased my pension obligation by $1,000. And notice if I net my PBO and I net my plan asset. Remember when I started the net was zero. I was not overfunded. I was not underfunded. By year end I looked at my PBO it's $215,000. I look at my plan asset from the beginning till the end. Now I have only $214,000. Now I'm short $1,000. Now my plan is underfunded by $1,000. So let's take a look at the journal entry. I debit pension expense, credit cash, and credit pension asset liability. Basically I'm crediting a liability. So this is the journal entry. This one here, the journal entry. Now remember my balance now is $1,000. So when I start next period, and this is important because when you start next period, this $215,000 will be up here. This $214,000 will be up here. Then we'll start again accounting for service cost interest cost and I will add maybe some prior, not maybe I will add prior service, prior service costs and gains and losses. What should you do now? Go to forhatlectures.com and work multiple choice questions, true, false, and exercises. This is how you learn. This is how you became competent in your field. Good luck, study hard, and don't short change yourself. Subscribe.


What's up my friends? There's my bike and it's all dressed up and ready to go. I am here in Las Cruces, New Mexico to go on a little bikepacking adventure and I'm excited. And unlike a lot of my adventures, I'm not going alone. In fact, I'm going with a lot of people. Squeeze it in, squeeze it in tight guys. All right. Look at all of these bikepackers. What a beautiful sight. This is a group star on the monumental loop.  Not a competitive event. Nobody's trying to race. We're just out there to connect with each other and with the landscape and see what happens. What can we look forward to? You're going to see five different mountain ranges along the way. All sort of tied together with the Rio Grande Valley. What about green chilies and good Mexican food? There's a ton of that and I recently rerouted the route to put less sand, less difficult hiking and more time in the Rio Grande Valley, eating burritos and chile reunos and all the stuff that makes this place so special. All right. It's not every day. I get to lean my bike up next to a palm tree. So I have pretty much the same setup as always. I'm bringing my big cans in the back here because we're in the desert and I'm going to need water. But there it is, the priority 600x. Of course we've got our pinion and gates. We've got the Ren fork up here and I love this bike. I'm really excited to get back on it. How are we all doing? She's no whammies! You know when you get somewhere and you meet people and you just feel good, like you feel like the energy is right, that's how I feel right now. Here's to some good people here. Yeah! Oh, that's a very precarious burrito. You better not hit a big bump, buddy. Oh, these people are like, who is this weirdo? Now we're riding on some really nice, quiet canal roads that are snaking out of the city. We're heading toward these big beautiful mountains. Yeah! So these mountains right in front of me are called the Dona Annas. And it's really beautiful. Kind of reminds me of Baja a little bit. Yeah, buddy! About midday right now and that new Mexican wind that I love so much is kicking up. Luckily it's not really a factor because we change directions constantly. So sometimes headwinds, sometimes tailwinds, sometimes sidewinds. But I'm just really enjoying this a lot. It's just fun to hang out with people and ride bikes. About 25 miles in. We're in the Rio Grande Valley, nice and flat. Chili farms everywhere. Nut farms. It's nice and hot and nice and windy. My goal is to get to hatch by dinner time because they have the best green chilies in the whole wide world. Come on, you can do it, buddy. What a sad tumbleweed. I'll give you a little boost. How's that? Go, tumbleweed! Grasshoppers. Having a grand old time here in the desert. Get it, buddy. Big hill here. Big hill. Yeah, that got me going. That was hard. Better to walk. Nice little slowdown. You got this, bud. Yeah, I got it. You got it. Hank and I have new friends now. What's up, guys? How's it going? How's it going? What's your name? My name's Carl Devine. How you doing, brother? What's your name? I'm Bobby. I'm from Albuquerque. Okay, right on, man. So you're proud of your state?  Of course. Where are you from? Albuquerque, also. What are you thinking so far in the route? I'm feeling a little beat up. I expected to get a little further today. I'm having some honest assessments. Gratitude checks as well. You gotta appreciate that you're out here having fun and all these people rode this route a hundred different times and put it together to make it so that we can come out here and enjoy it and it's all pieced together very nicely, you know. Out of this cattle tank. Whoa, this is a little precarious. Oh, yeah, here we go. Look at that. Look at that water. Look at that water. Water's life. All right, so I can't just take that water and drink it because, you know, it's probably really dirty. So I'm going to zap it with my UV thing. And there's definitely some water bugs in there. I don't think you can see them, but little black bugs are swimming around. So this is not vegetarian water. I'm about to murder some insects. Sorry, guys. Don't want those in your teeth. Got a pretty strong headwind as we head into Hatch. That's okay. I have these three dudes in front of me blocking the wind. I'm so hungry.  Hopefully a burrito of some sort with green chili. Look at that guy. What's up, buddy? I'm riding by all these restaurants and they're all closed. No. There might not be any burritos, but they're certainly an epic sunset. Look at that. Incredible. So I found the only restaurant open. It's kind of a food truck and I went to the menu and the guys are sort of speaking Spanish to me. And these guys right here are from Honduras and Guatemala. Amigos, ¿Cómo estamos? Mira la comida que me existe. Wow, así es. I don't get to meet Central Americans very often, especially not Hondurans. Whenever I meet a Honduran, because I lived there for two years, I get very excited. And they say I can camp out back. Out back, right? Yay, thank you. And you know, this is the thing. Something always works out. It always works out. Let's see how it works. Oh, wow. Who is this? Is that your little kitty? Yep. So they just asked me something really cute. They said, where are your pajamas, right? Yeah. I never really thought about that. You know, kids always go to bed in pajamas and I don't have anything cool. I don't have T-Rex pajamas or SpongeBob or anything. I need to work on that. All right. I'm in my tent behind the food truck and I am cozy and I'm happy. I love situations like this. I always feel really comfortable around Mexican people. This place is owned by Mexicans and they've got some Central American chefs in there. And it's just fun. I love it. And today was a great day, you know, but I will admit, I am tired. It was hard. That wind just kind of wore me out. There were sometimes with tailwind, but mostly it was headwind. That's how it always goes, right? But yeah, just taking off today with everybody and the emotion and the energy was so exciting. It's just, you know, I've been a part of that energy in running races, but never in a bike event. I've never really done bike races and this isn't a race, but you know what I mean? Made it about 70 miles today and that's right on pace for finishing this in four days, which I have to do because I fly out on the fifth day. So, you know, I got to keep moving, hustling, but you know, enjoy it. And New Mexico will always have a special place in my heart. It is so stunningly beautiful here and the people are really cool. So I'm going to sleep here on the side of the road and be very grateful for that. That's where I slept right there and I have a deluxe bathroom right next to me. This was actually really handy and it didn't smell bad. Here we go, breakfast of Campiones Champions. Got some chilies to the situation here. Oh yeah, there it is, the famous Duzerito. Never gets old. I can eat beans all day long, pretty much. Thank you Pepe's Parking Lot for a beautiful place to sleep last night. That way. Here comes the sun. All right and today the goal is to get to back to Las Cruces and finish this northern loop. I mean it's about 65-ish miles away. I'm really thankful to that family back there who let me stay at their place because otherwise I probably would have been sleeping in this ditch right there. Now this is a this is a Baja Divide style road here. Sandy, rocky, bumpy, going about five miles an hour. Man this is rough. This is tricky riding. You really have to look ahead and scan what's coming and try to find the root of least resistance. Sometimes it works and sometimes it doesn't. There it is, the monumental loop. All right, way. I just need to go through this fence. I'm starting to see signs of riders. Somebody dropped their gummy bears. Should I eat it? Of course. Five second roll or 12 hour roll. Thank you whoever dropped this gummy bear. I found some humans. What's up brother? How you doing? Doing great. How was riding that in the night? It was pretty epic with this group here man. We got each other here with just like a few minutes before midnight yeah. Wow that's impressive. Nothing like a little bit of early morning cow trough water. Cow water. Cow water. Look at this thing. What kind of road is this? This is fun. Yeah, there they go up this hill. That way then up, up, up, up, up, up, big stuff. Let's do it. Here we go. Yeah, it's hard to get into any type of a rhythm because you just bounce off rocks the whole time. Come on buddy. I'm good. You know what? I'm good. Other way to go. Oh, thanks. Yeah. Nice job Ombre. So it seems like we're out of the super duper rocky stuff. Now we're just in the super rocky stuff. Not duper. How you doing Dustin? Doing awesome. What did you just check here? We've done about 5.8 miles and way too long time. We're like two hours or something? Something like yeah, I think it was about two hours. What's up buddy? What's up? How's it going? So what do you have here for us? Okay, so at the manor in the desert, our new pop-up restaurant, going live next week now. So we got soda pop, we got water, we have chips, we have cookies, we're all sold out of the steak tartare. Oh, it's an emotional support puppy. Scott just said he wants to do an ole. Ole, ole, ole, ole, ole, ole, ole. All right. What a nice family. Back in the sand, back in the sand. I love sand. It's so fun. And the plaza in Mesilla.  Feels like I'm in Mexico. Dustin, are we almost there? I'm tired. Are we almost there? Are we almost there? We need water and brownies and brownies for sure. Thank you so much, Dustin and Katie for inviting us into your house and making yummy spaghetti.  All right, bike, let's do this. Oh, are you guys ready? We're ready. No flatties, no crashes, no whammies, no whammies, big money, big money, no whammies. It's nice and cool and crisp this morning, but it's going to go up to about 85, which is perfect for me. And yeah, two more days on the road. Buenos dias, amigos. Buenos dias. So we're heading up that way. We're going to be riding some single track up in these mountains somewhere. And that makes me happy. Beautiful. You know, there's sometimes when I'm on these adventures day after day, grinding when I wake up like today and I'm like, ooh, I'm tired. Everything's tired.  And then, you know, I start riding and I get into an area like this. And I'm like, oh yeah, I'm okay. I am going to be okay. Okay. Lots of these sandy washes up and out in and out of a lot of these. It's pretty much impossible to avoid these thorny bushes. Ow, you're going to get bloody. That's just part of it. Little souvenir from the desert. Hey, buddy, what are you doing laying there?  It's time to go.  Yeah, boy. So many plants that want to make me bleed. This one right here is the worst of the worst. This is the Ocotillo.  Man, they're getting mighty close to the trail. They're grabbing at us. I need to wear armor next time. That's high five for that single track. Heck yeah. Yeah, that was amazing. It really was. That was so much fun. All right, we just rolled into the city town of Valo. And there's our taco truck. Tacos del Torrito. Bean burrito. Fueled by beans. Always. Frejoles. Me encanta. I've said it a million times, but food always tastes better after you pedal for a long time. It tastes so good. Are you looking for leftover beans?  Is that what you're looking for? Every taco truck needs a taco cat. Thank you so much for the bean burritos. You're wonderful. Oh man. I'm a new person after all those beans. It's amazing what some calories will do for your body physically, but also mentally. Makes you feel so good. So those guys are heading to a gas station to poop. I don't want to wait for that. So I'm going to keep riding. I'll see them down the road at some point. You know what I'm thinking about as I ride this flat and slightly washboardy road is that, you know, Matt, the founder of The Root developed this like a handful of years ago. And now hundreds, maybe thousands, definitely in the future thousands of people are going to come ride this and have the time of their lives, but also expose bike packing and bike culture to all these small towns and give these small towns a lot of business, which is really cool. You know what this is? Cotton. Can you believe it? Growing up, you know, you learn about cotton plantations like in Mississippi and like the deep south. You don't think of New Mexico, but here it is. When you touch it, it's definitely cutty. So soft. Look at that. Very cool. All right. I am now in the town of Vinton. I just got a nice cold sprite. So nice. I think it's like 87 degrees today. And on the map, it says that this town is kind of the last place to get food and water for the next 90 miles. There might be some cattle tanks out there to get some water, but this is the last sure shot. So I just filled up all my water bottles, got my cold drink, and I'm going to keep on moving. Thank you, Family Dollar. Oh, look, sand. My favorite. Not going to be moving as fast in this stuff. You know, there's something strange and beautiful about being in the middle of nowhere. It's a good place to get lost in your mind and just think about anything. It's fun. It's limitless. You just sit here, you have all the time in the world to think about stuff. I do my best thinking on the seat of a bike. That is for sure. Check this out. So on the root notes on ride with GPS, they tell you a little bit about this place. This is called the Kilbourne Hole, and they say it was a testing site for the Apollo missions. How cool is that? Space people have trained here, I guess, because it looks like space looks like another planet out here. Here's a look at my house. I've got my quilt sleeping pad, charging station, and most importantly, view of the mountains. Sunset is coming soon. Yep, I'm happy that I stopped here. I even have a drying rack for my chamois. Goodbye, sun. Thank you for another beautiful day. It was a good one. Thank you, New Mexico. This will be my last night out on the monumental loop. It's been an amazing adventure. I've really, really, really enjoyed all aspects of this ride. Way off in the distance there. You can see the mountains where we were biking this morning. We are far away from that now. We're next to a crater. A big hole. Here's what my legs look like after the thrashing today.  You know, one of the many things that I love about the desert is the silence. It is so quiet out here right now. Haven't slept much. It's been a little windy. It's about five in the morning. I'm going to try to get going because the National Weather Service has issued a wind advisory. Very strong gusts. I'm going to try to ride before it gets way too gnarly. I'm up, so why not go right now? Yay. There's also quite a bit of moonlight, so that should help guide me. It's pretty bright outside. Thank you, beautiful piece of flat ground right next to this crater you can't really see right now. Sure, I'm glad my wahoo works in the dark because you can't see a whole lot that way. All right, so far so good. It's definitely windy, but it's beautiful. I love it. I'm riding to the moonlight with the stars as my guide. Oh, it's definitely windy, and it's supposed to get way windier. That's why I'm out here early to try to get some of these miles in while it's not crazy windy. Just a little bit. Okay, I haven't gone very far. Mainly because of sand, not so much because of wind. It's really deep sand, and it's hard to navigate sand in the dark. I don't know if I could navigate it in the light either. Whoa, there's a tree right there. Talk about navigating. It's a beautiful time to be riding a bike. All right, bike, I know we woke up early.  I know you're tired. Get up, bike, let's go. All right, so the sun is on its way. It's funny. It was really windy at like five in the morning, but right now it's completely still. I need to keep moving, and hopefully it's not as severe as they're saying. All right, I've been riding for two hours. I've only gone nine miles. It gives you an idea of how fast I'm not going, and it's time for a pro meal bar. Not sponsored by pro meal, but I just love these things. It's just a big chunk of calories and some chocolate chips. So I'm riding by this farm, and I see somebody walking in the field. I think it's a farmer. Nope, it's Aaron. What's up, buddy? Hey, good morning. Did you have a good night? I did. Did you? Yeah, man. Good. Yeah, you sleep well? Yeah. Yep, no snakes, no creepy crawlies. Buenos dias, Kyle. Buenos dias. How you doing, buddy? Doing good. Danger bird day four. Yes, sir. I'd like to think that it's the final day. It better be. Yeah, slept here and ground was soft. Yeah, look at that nice soft sand you found. I know. Well, we found plenty of it walking through it yesterday. All right, so we've come to a fork in the road. The true route takes us all the way around this train track 15 miles. But it does say in the ride with GPS notes that you can go across if you could find this magical gate and be careful because trains can kill you. So I'm thinking we should cut off 15 miles. What about you guys? Yeah, yeah. This maneuver is saving us 15 miles. And I'm cool with it. Thank you, gate master. All right, we did it. I feel like we just got a cheat code in a video game.  So the route goes all the way left over back boom. But we went straight across right here. Way easier. In something like that is calling my name. Get back where we started on Saturday. Today is Tuesday. Thank you danger bird monumental loop Matt Pablo. Everybody involved. This is awesome. This route had it all. It was challenging. It was interesting. It was beautiful. Made lots of new friends got to ride with people. Got to sleep under the stars. This was a winner for sure. I'm so glad I made the effort to come on down here and do this. And I'm really impressed with what Matt and Pablo have created. And like I said on Saturday, the energy of the group really just stayed with me the whole time. It was really fun to be part of this because a lot of times bikepacking is a solitary sport. At least it is for me. I just go off on my own and do my thing. And sometimes I'm with one or two people. But it was really unique to be part of like a thing. And even though we weren't all together all the time, it was fun just knowing that on this entire route there were about a hundred or so people scattered around and we were all connected by this little blue line, the monumental loop. And it was monumental. And you know what I'm really happy about as well? The heat. It's warm. I feel like I got some bonus summertime. Thank you so much for watching this series. Please like and subscribe and tell all your weird friends about my channel. That's the best way to have my channel grow is just word of word of mouth. And I like weird subscribers. I like weird people. You know what I'm saying? Bam. High five it up. Bam. Okay. Beans. Time for beans. Oh yeah, there we go. Good work, hombres. So ready for this.