Gottschalk Company sponsors a defined benefit plan for its 100 employees. On January 1, 2015, the company’s actuary provided the following information.

The average remaining service period for the participating employees is 10 years. All employees are expected to receive benefits under the plan. On December 31, 2015, the actuary calculated that the present value of future benefits earned for employee services rendered in the current year amounted to £52,000; the defined benefit obligation was £490,000, fair value of pension assets was £276,000, and the accumulated benefit obligation amounted to £365,000. The discount (interest) rate is 10%. The actual return on plan assets is £11,000. The company’s current year’s contribution to the pension plan amounted to £65,000. No benefits were paid during the year.
Instructions

(a) Determine the components of pension expense that the company would recognize in 2015. (With only one year involved, you need not prepare a worksheet.)

(b) Prepare the journal entry to record the pension expense and the company’s funding of the pension plan in 2015.

(c) Compute the amount of the 2015 increase/decrease in gains or losses.

(d) Indicate the pension amounts reported in the financial statement as of December 31, 2015.

Transcribed Image Text:

Pension plan assets (fair value and market-related asset value) 200,000 Accumulated benefit obligation 260,000 Defined benefit obligation 380,000