Feeble Co. on January 1, 2011 initiated a noncontributory, defined-benefit pension plan that grants benefits to its

Question:

Feeble Co. on January 1, 2011 initiated a noncontributory, defined-benefit pension plan that grants benefits to its 100 employees for services rendered in years prior to the adoption of the pension plan. The total expected service-years of the 100 employees who are expected to receive benefits under the plan is 1,200. An actuarial consulting firm has indicated that the present value of the projected benefit obligation on January 1, 2011 was $5,040,000. On December 31, 2011 the following information was provided concerning the pension plan's operations for its first year.

Employer's contribution at end of year $1,600,000

Service cost 600,000

Projected benefit obligation 6,043,200

Plan assets (at fair value) 1,600,000

Expected return on plan assets 9%

Settlement rate 8%

Instructions

(a) Compute the pension expense recognized in 2011. Assume the prior service cost is amortized over the average remaining service life of the employees.

(b) Prepare the journal entries to reflect accounting for the company's pension plan for the year ended December 31, 2011.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...