Question

Harmony Express Company ofers a defined-benefit pension plan to all its employees. At December 31, 2015 the fair-value of the plan assets, which equal the market-related asset value, was $600,000and the Projected Benefit Obligation was also $600,000. On January 1, 2016, as part of the union agreement, Harmony Express Company granted $75,000 in retroactive benefits to all employees for their prior years' service when the average remaining service life of employee base was 10 years. The actuary provided the following information related to the plan for 2016 through 2018:

DESCRIPTION	2016	2017	2018
Service Cost for the Year	$43,250	$55,200	$58,750
Settlement Rate	7%	6%	5%
Expected Return on Plan Assets	5%	5%	5%
Actual Return of Plan Assets	42,000	37,500	40,240
Contributions for the Year	35,000	94,500	43,000
Benefis Payments for the Year	26,100	33,400	34,750
Decrease in the ending proyected benefit obligation due to changes in actuarial assumptions		75,200

I. Fill the following table to compute the pension expense for each year. Show all components of pension expense.

COMPONENTS OF PENSION EXPENSE	2016	2017	2018

II. Determine the beggining and the ending balance of projected benefit obligation and plan assets. Calculate the funded status for the plan for each year.

YEAR	Proyected Benefit Obligation	Plan Assets	Funded Status
2016
Beginning Balance
Ending Balance
2017
Beginning Balance
Ending Balance
2018
Beginning Balance
Ending Balance

III. Record the journal entries to record the pension expense for each year:

Answer 1

Requirement 1

Component Of pension expense	2016	2017	2018
Service Cost	$    43,250	$    55,200	$    58,750
Interest Cost	$    47,250	$    45,930	$    39,572
Amortisation of Prior Service Cost	$      7,500	$      7,500	$      7,500
Amortisation of OCI Gain	$            -	$      1,561	$      1,422	W.N.1
Expected Return on plan asset	$    30,000	$    32,545	$    37,475
Pension Expense	$    68,000	$    74,525	$    66,925

W.N.1	2016	2017	2018
OCI Gain	$         12,000	$           92,155	$    93,360
Corridor Amortization	$                -	$             1,561	$      1,422

Requirement 2

Year	Projected Benefit Obligation	Plan Assets	Funded Status
2016
Beginning Balance	$                                 6,75,000	$      6,00,000	$          -75,000
Ending Balance	$                                 7,65,500	$      6,50,900	$       -1,14,600
2017
Beginning Balance	$                                 7,65,500	$      6,50,900	$       -1,14,600
Ending Balance	$                                 7,91,430	$      7,49,500	$          -41,930
2018
Beginning Balance	$                                 7,91,430	$      7,49,500	$          -41,930
Ending Balance	$                                 8,89,752	$      7,97,990	$          -91,762

Requirement 3

Particulars	Debit	Credit
2016
Pension expense	$    68,000
Plan Assets	$    42,000
To OCI Gain		$    12,000
To OCI Prior Service Cost		$      7,500
To Projected Benefit Obligation		$    90,500
(Being pension expense recognised for the year)
2017
Pension expense	$    74,525
Plan Assets	$    37,500
To OCI Gain		$      3,395
To OCI Prior Service Cost		$      7,500
To Projected Benefit Obligation		$ 1,01,130
(Being pension expense recognised for the year)
2018
Pension expense	$    66,925
Plan Assets	$    40,240
To OCI Gain		$      1,343
To OCI Prior Service Cost		$      7,500
To Projected Benefit Obligation		$    98,322
(Being pension expense recognised for the year)