2. Harms Inc. reported in its 2011 annual report the following information: Plan Status: December 31, 2011 Accumulated benefit obligation (ABO) $9,000,000

Projected benefit obligation (PBO) 7,000,000

Plan assets (at fair value) 8,000,000

Unamortized prior service cost 200,000

Unamortized transition asset 300,000

Related assumptions:

Service cost expected on to be 10% of PBO

Unamortized prior service cost to be amortized over 20 years

Unamortized prior transition asset to be amortized over 20 years

Actual rate of return on plan assets 15%

Discount rate 8%

Expected rate of return on plan assets 10%

Compensation growth 5% Instructions A. Compute the net pension expense to be recorded in the income statement? B. Determine whether the plan is over or under funded and explain why?