On January 1, 2013, Parkway Company adopted a defined benefit pension plan. At that time, Parkway awarded retroactive benefits to its employees, resulting in a prior service cost of $2,180,000 on that date (which it did not fund). Parkway decided to amortize this cost by the straight-line method over the 16-year average remaining service life of its active participating employees. Parkway's actuary and funding agency have also provided the following additional information for 2013 and 2014:

Parkway contributed $670,000 and $700,000 to the pension fund at the end of 2013 and 2014, respectively. There are no other components of Parkway's pension expense. At the end of 2014, the projected benefit obligation was $3,359,800 and the fair value of the pension plan assets was $1,430,300.
Required:
1. Compute the amount of Parkway's pension expense for 2013 and 2014.
2. Prepare all the journal entries related to Parkway's pension plan for 2013 and 2014.
3. What is the total accrued/prepaid pension cost at the end of 2014? Is it an asset or a liability?

Transcribed Image Text:

2013 2014 $340,000 348,000 2,180,000* 2,738,000 670,000 10% 9% Service cost Plan assets (1/1) Discount rate 0 10%