Question
Goodday Ltd. has a defined benefit pension plan and a December 31 year-end. The following information relates to the plan: Balances: Defined benefit obligation, end
Goodday Ltd. has a defined benefit pension plan and a December 31 year-end. The following information relates to the plan:
Balances: | |||||
Defined benefit obligation, end of 20X7 | $ | 5,265,000 | |||
Pension plan assets, fair value, end of 20X7 | 4,710,000 | ||||
SFP net defined benefit liability, end of 20X7 | 555,000 | cr. | |||
SFP accumulated OCI, pension, end of 20X7 | 71,200 | dr. | |||
Retained earnings, end of 20X7 | 8,631,400 | cr. | |||
20X8 earnings, prior to any pension expense | 4,220,000 | cr. | |||
Current service cost for 20X8, measured using the projected unit credit method | 650,300 | ||||
New past service cost granted in 20X8, negative because benefits were reduced and the liability has declined | ((382,000 | ) | |||
Contributions made to the pension plan assets paid at end of 20X8 | 429,000 | ||||
Actuarial gain in 20X8, negative because caused by higher anticipated future mortality rates and the liability has declined | (103,500 | ) | |||
Actual earnings in the fund, reported by the pension fund trustee, including interest, dividends, and change in fair value | 149,800 | ||||
Benefits paid to pensioners from Pension fund assets paid at end of 20X8 | 76,300 | ||||
Interest rate on long-term corporate bonds, end of 20X8 | 4 | % | |||
Required: 1. Calculate and record the second element of pension accounting for the defined benefit plan. That is, calculate net interest cost.
Find : Net interest
2. Prepare the entry to record net interest cost. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Record the interest expense for net defined benefit pension liability. (journel entry)
3. Calculate the two components of net interest: interest on the defined benefit obligation and expected earnings on fund assets. A. interest on the obligation
B. Expected earning
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