Question

The following defined pension data of Stellar Corp. apply to the year 2017.

Projected benefit obligation, 1/1/17 (before amendment)		$582,000
Plan assets, 1/1/17		566,900
Pension liability		15,100
On January 1, 2017, Stellar Corp., through plan amendment,    grants prior service benefits having a present value of		130,000
Settlement rate		9	%
Service cost		59,500
Contributions (funding)		60,400
Actual (expected) return on plan assets		53,100
Benefits paid to retirees		40,500
Prior service cost amortization for 2017		15,400

For 2017, prepare a pension worksheet for Stellar Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.

Answer 1

Plan assets	Ref	Amount
Balance at start of 2017	a	5,66,900
Interest @ 9%	b=a*9%	51,021
Total at end of 2017	c	6,17,921
Add: contributions made	d	60,400
Less: benefits paid	e	40,500
Balance at end of 2017	f=c+d-e	6,37,821
Add: Acturial Gain as per working	g	2,079
Net balance as at the year end of 2017	h=f+g	6,39,900
Acturial Gain/loss
Actual return on plan assets	a	53,100
Less: Expected interest on plan assets	b	51,021
Acturial gain	c=a-b	2,079

Plan liability	Ref	Amount
Balance at start of 2017	a	5,82,000
Add: prior service cost	b	1,30,000
Total	c=a+b	7,12,000
Add: Interest @ 9%	d=c*9%	64,080
Add: service cost	e	59,500
Less: benefits paid to retirees	f	40,500
Net balance as at the year end of 2017	g=c+d+e-f	7,95,080
Pension Expense for the year 2017	Ref	Amount
Interest cost on plan liability	a	64,080
Less: Interest gain on plan asset	b	51,021
Add: Current service cost	c	59,500
Add: amortisation of past service cost	d	15,400
Pension Expense for the year 2017	e=a-b+c+d	87,959

Remeasurement gain/ loss to be shown in Other comprehensive income
Particulars	Ref	Amount
Past service cost estimation created	a	1,30,000
Less: Amortisation of past service cost for 2017	b	15,400
Less: Acturial Gain on plan assets	c	2,079
Net Re-measurement loss in OCI	d=a-b-c	1,12,521

Journal entry for pension expense
	Debit	Credit
Pension expense a/c	87,959
OCI a/c	1,12,521
Net pension liability		2,00,480
Entry for contributions made
Net pension liability	60,400
Bank a/c		60,400

Hope it helps.

Thank you.