On January 1, 2007 the Baznik Company adopted a defined benefit pension plan. At that time the company awarded retroactive benefits to certain employees. These retroactive benefits resulted in an unrecognized prior service cost of $1,200,000 on that date. The company has six participating employees who are expected to receive the retroactive benefits. Following is a schedule that identifies the participating employees and their expected years of future service as of January 1, 2007:

Expected Years of

Employee Future Service

A ........1

B ........3

C ........4

D ........5

E ........5

F ........6

The company decided to amortize the unrecognized prior service cost to pension expense using the years-of-future-service method. The following are the amounts of the components of Baznik Company's pension expense, in addition to the amortization of the unrecognized prior service cost for 2007 and 2008:

The company contributed $850,000 and $830,000 to the pension fund at the end of 2007 and 2008, respectively. Ignore any additional pension liability.
Required
1. Prepare a set of schedules for the Baznik Company to determine
(a) The amortization fraction for each year, and
(b) The amortization of the unrecognized prior service cost.
2. Prepare the journal entries to record the pension expense for 2007 and2008.

Transcribed Image Text:

2007 Service cost Interest cost on projected benefit obligation Expected return on plan assets 2008 $507,000 159,930 85,000 $469,000 108,000