Griseta Limited sponsors a defined benefit pension plan for its employees, which it accounts for using the deferral and amortization approach under PE GAAP. The following data relate to the operation of the plan for the year 2011:
1. The actuarial present value of future benefits earned by employees for services rendered in 2011 amounted to $56,000.
2. The company’s funding policy requires a contribution to the pension trustee of $145,000 for 2011.
3. As of January 1, 2011, the company had an accrued benefit obligation of $1 million and an unrecognized past service cost of $400,000. The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The actual and expected return on plan assets was $54,000. The discount rate was 9%.
4. Amortization of past service costs was $40,000 in 2011.
5. No benefits were paid in 2011.
Instructions
(a) Determine the pension expense that should be recognized by the company in 2011.
(b) Prepare the journal entries to record pension expense and the employer’s payment to the pension trustee in 2011.
(c) Determine the plan’s funded status and reconcile this to the accrued pension asset/liability on the December 31, 2011 balance sheet.
(d) Assuming Griseta is not a public company and does not have broad public accountability, prepare the required disclosures for the 2011 financial statements.
(e) Calculate the January 1, 2011 balance in accrued pension asset/liability.