Additional Pension Liability In the Fisk Company’s negotiations with its employees’ union on January 1, 2007, the company agreed to an amendment which substantially increased the employee benefits based on services rendered in prior periods. This resulted in an $80,000 unrecognized prior service cost that increased both the projected benefit obligation and the accumulated benefit obligation of the company. Due to financial constraints the company decided not to fund the total increase in its pension obligation at that time.
Prior to 2007 it had been the company’s policy to fund enough of its pension expense each year so that the fair value of the plan assets at the end of the year was greater than the year end accumulated benefit obligation. As a result the company reported a prepaid/accrued pension cost liability of $40,000 on its December 31, 2006 balance sheet.
The company appropriately amortized the unrecognized prior service cost as a component of pension expense in 2007 and 2008. The resulting pension and other information for 2007 and 2008 are as follows:
|
Year |
Pension Expense |
Company Contributiona |
Accumulated Benefit Obligationb |
Fair Value of Plan Assetsb |
|
2007 |
$137,000 |
$125,000 |
$562,000 |
$500,000 |
|
2008 |
145,000 |
160,000 |
682,000 |
637,000 |
a. Funded December 31
b. At year end
Required
1. Prepare the December 31, 2007 journal entries related to the Fisk Company’s pension plan.
2. List the amounts of any assets and liabilities to be reported on the company’s December 31, 2007 balance sheet.
3. Prepare the December 31, 2008 journal entries related to the Fisk Company’s pension plan. 4. List the amounts of any assets and liabilities to be reported on the company’s December 31, 2008 balance sheet.