In: Accounting
Part 1) Melanie Vail Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances relate to this plan.
Plan assets |
$480,000 |
Projected benefit obligation |
625,000 |
Accumulated OCI (PSC) |
100,000 Dr. |
Accumulated OCI (Gain/Loss) |
85,000 Cr. |
As a result of the operation of the plan during 2017, the following additional data are provided by the actuary:
Service cost for 2017 |
$90,000 |
Settlement rate |
9% |
Actual return on plan assets in 2017 |
57,000 |
Expected return on plan assets |
10% |
Unexpected loss from change in projected benefit obligation, due to change in actuarial predictions |
76,000 |
Contributions in 2017 |
99,000 |
Benefits paid retirees in 2017 |
85,000 |
Avg. remaining service life (all employees) |
12 years |
1) Please use the spreadsheet below 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.
Annual | Projected | ||||||||||||
Pension | OCI—Prior | OCI— | Pension | Benefit | |||||||||
Items | Expense | Cash | Service Cost | Gain/Loss | Asset/Liability | Obligation | Plan assets | ||||||
Balance, Jan. 1, 2015 | |||||||||||||
Service cost | |||||||||||||
Interest cost | |||||||||||||
Actual Return | |||||||||||||
Expected Return | |||||||||||||
Amortization of PSC | |||||||||||||
Contributions | |||||||||||||
Benefits | |||||||||||||
Liability increase | |||||||||||||
Journal entry for 2015 | |||||||||||||
Accumulated OCI, Dec. 31, 2014 | |||||||||||||
Balance, Dec. 31, 2015 |
2) Prepare the journal entry using a spreadsheet to record pension expense in 2017. Please provide a one line explanation for the reason why the journal entry has been made. Thanks very much!