Assume the same facts for ABC Corporation as in P14-5 with the following exceptions:

∙ Assume both that ABC fully funds the estimated PBO on January 1, 2017, and that invested funds earn an actual return of 12% in 2017.

∙ Suppose that in addition to funding the estimated PBO on January 1, 2017, ABC follows a policy of contributing to the pension fund (at the end of each year) an amount equal to the estimated pension expense less the prior service cost component, which was prefunded.

On December 31, 2017, the discount rate drops from 10% to 9%. In 2018, the 9% discount rate will be used to compute service cost and interest cost, while the expected return on plan assets remains at 10%. At January 1, 2018, the average remaining years of service for Workaholic is 14 years.

Required:

1. How much pension expense should ABC recognize in 2017? Show the components of pension expense.

2. Compute the funded status at December 31, 2017. Explain why the amount changed from January 1, 2017.

3. Compute the pension expense and amount funded in 2018. (Assume that the actual return on plan assets is 10% in 2018.)

4. Compute the funded status of the plan at the end of 2018.