On December 31, 2007 the Palmer Company determined that the 2007 service cost on its defined benefit pension plan was $120,000. At the beginning of 2007 Palmer Company had pension plan assets of $520,000 and a projected benefit obligation of $600,000. Its discount rate (and expected long-term rate of return on plan assets) for 2007 was 10%. There are no other components of Palmer Company’s pension expense; the company had a prepaid/ accrued pension cost liability at the end of 2006.

Required

1. Compute the amount of Palmer Company’s pension expense for 2007.

2. Prepare the journal entry to record Palmer’s 2007 pension expense if it funds the pension plan in the amount of: (a) $128,000, and (b) $120,000.