Pension Cost Components and Reconciliation of Funded Status
As of January 1, 2008, information related to the defined benefit pension plan of Leffingwell Company was as follows:
|
PBO |
$1,615,000 |
|
Fair value of pension assets |
1,513,500 |
|
Unrecognized prior service cost |
105,000 |
|
Unrecognized net pension gain or loss |
0 |
Pension data for the years 2008 and 2009 are listed as follows:
|
2008 Pension plan information: |
|
|
Service cost as reported by actuaries |
$ 87,000 |
|
Contributions to pension plan |
$ 120,000 |
|
Benefits paid to retirees |
$ 132,000 |
|
Actual return on pension plan assets |
$ 26,350 |
|
Amortization of prior service cost |
$ 21,000 |
|
Actuarial change increasing PBO |
$ 80,000 |
|
Settlement interest rate |
110% |
|
Long term expected rate of return on pension plan assets |
100% |
|
ABO, December 31, 2008 |
$1,530,000 |
|
2009 Pension plan information: |
|
|
Service cost as reported by actuaries |
$ 115,000 |
|
Contributions to pension plan |
$ 125,000 |
|
Benefits paid to retirees |
$ 140,000 |
|
Actual return on pension plan assets |
$ 180,000 |
|
Amortization of prior service cost |
$ 18,667 |
|
Settlement interest rate |
110% |
|
Long term expected rate of return on pension plan assets |
100% |
|
ABO, December 31, 2009 |
$1,850,000 |
As of January 1, 2009, the remaining expected service life of employees was 5.0 years. Also, Leffingwell uses the fair market value of pension plan assets at the beginning of the year as the market related value of pension plan assets.
Instructions:
1. For both 2008 and 2009, prepare the pension note that discloses the component parts of pension expense as well as the items that combine to yield the net amount reported in the balance sheet.
2. Prepare the journal entries for recording net pension expense and pension funding for 2008 and 2009.
3. Compute any additional liability to be recorded for each of the years. Prepare the necessary journal entry.