On 1 January 20X0, Rainbow Inc. established a defined benefit pension plan for its employees. At the inception of the plan, the present value of the defined benefit obligation relating to employees' past service was $240,000. The pension funding is made to a trustee each year on 31 December. The interest rate on high quality corporate bonds is 7%. The following information was provided by an actuary:

Required:
1. Prepare the journal entries to record pension expense, net interest, funding payment and actuarial remeasurements for 20X0 and 20X1.
2. What is the amount of the net defined benefit asset on the 31 December 20X1 statement of financial position? Prove that this is equal to the net position of fund assets and the defined benefit obligation.
3. Prepare the necessary additional entry that would be made if there was an asset ceiling of $7,500 in 20X1. What is the net defined benefit asset on the 31 December 20X1 statement of financial position?

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Current service cost, measured at the end of the year Funding payment, made at the end of the year Actual return on plan assets 20X0 $ 98,300 240,000 0 20X1 $ 86,570 230,000 25,000