Melanie Vail Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2015,
Melanie Vail Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2015, the following balances relate to this plan.
Plan assets | $480,000 |
Projected benefit obligation | 625,000 |
Accumulated OCI (PSC) | 100,000 |
As a result of the operation of the plan during 2015, the following additional data are provided by the actuary.
Service cost for 2015 | $90,000 |
Settlement rate | 9% |
Actual return on plan assets in 2015 | 57,000 |
Amortization of prior service cost | 19,000 |
Expected return on plan assets | 52,000 |
Unexpected loss from change in projected benefit obligation, due to change in actuarial predictions | 76,000 |
Contributions in 2015 | 99,000 |
Benefits paid retirees in 2015 | 85,000 |
Click here to download the Excel Template linked here, containing the spreadsheets you will need for this exercise.
- Use the spreadsheet Pensions to prepare a pension worksheet. On the pension worksheet, compute pension expense, pension asset/liability, projected benefit obligation, plan assets, prior service cost, and net gain or loss.
- Compute the same items as in (#1), assuming that the settlement rate is now 7% and the expected rate of return is 10%.
- Prepare the journal entry using the spreadsheet Journal Entries to record pension expense in 2015. You need to prepare journal entries for only #1 above.
- Indicate the reporting of the 2015 pension amounts in the income statement and balance sheet using the spreadsheet Pensions. You need to show financial statements’ presentations for only #1 above.
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Solution: Melanie Vail Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2015,