Question
. (a) Identify the components of pension expense. Briefly explain the nature of each component. (6 marks) 3. (b) Simpson Company sponsors a defined benefit
. (a) Identify the components of pension expense. Briefly explain the nature of each component.
(6 marks)
3. (b) Simpson Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2012.
1. The actuarial present value of future benefits earned by employees for services rendered in 2012
amounted to $56,000.
2. The companys funding policy requires a contribution to the pension trustee amounting to $145,000
for 2012.
3. As of January 1, 2012, the company had a defined benefit obligation of $900,000, an accumulated
benefit obligation of $800,000, and a balance of $40,000 in accumulated OCI (Loss). The fair value
of pension plan assets amounted to $600,000 at the beginning of the year. The discount rate was
9%. Actual return on plan assets was $60,000, and no benefits were paid.
Instructions
(a) Determine the amounts of the components of pension expense that should be recognized by the
company in 2012.(6 marks)
(b) Prepare the journal entry or entries to record pension expense and the employers contribution to
the pension trustee in 2012. (3 marks)
(c) Indicate the amounts that would be reported on the income statement and the statement of financial
position for the year 2012. (5 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started