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HRC Company sponsors a defined benefits pension plan to its employees. On January 1 , 2 0 2 2 , the balances related to pension

HRC Company sponsors a defined benefits pension plan to its employees. On January 1,2022, the balances related to pension plan were as follows:
Projected benefit obligation (PBO) $2,600,000
Fair value of plan assets $2,500,000
AOCI Prior service cost -0-
AOCI Net Loss -0-
The discount (or settlement) rate applicable to the plan is 10%. Other data related to the pension plan are as follows:
20222023
Service cost $150,000 $170,000
Contributions (funding) to the plan 500,000880,000
Benefits paid to retirees 220,000280,000
Actual return on plan assets 150,000200,000
Increase in PBO due to changes in actuarial assumptions 250,000-0-
Expected return on plan assets 10%10%
Average service life of all employees 10 years
On January 1,2023, the company amends the pension agreement resulting in a prior service cost of $260,000. The company uses straight-line amortization of prior service costs over the average remaining service life of the employees.
Required: Using the Excel template provided (or you can use your own template as well):
1. Prepare Pension worksheet for the year 2022 and 2023 in Excel. Make sure to include all accompanying computations at the bottom of the worksheet (such as amortization of gain/losses).
2. Prepare the necessary journal entries for each year associated with the defined benefits pension plan for HRC.
3. What different amount(s)/ balances will be reported in the income statement and balance sheet at the end of year 2022 and 2023?
4. Is the pension plan underfunded or overfunded at the end of 2023 based on your computations?
5. Based on your answer for requirement 4, does HRC needs to increase or decrease the contributions to the pension plan in future assuming no immediate changes in actuarial assumptions? Why?
6. What journal entry would be recorded by HRC at the end of 2022 and 2023, if it was a defined contributions plan instead of defined benefits pension plan with the contribution from employer of $500,000 and $880,000 in 2022 and 2023 respectively? Which of the two pension plans is a better choice for the HRC company and Why?

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