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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 the balances related to pension plan were as follows:
Projected benefit obligation PBO $
Fair value of plan assets $
AOCI Prior service cost
AOCI Net Loss
The discount or settlement rate applicable to the plan is Other data related to the pension plan are as follows:
Service cost $ $
Contributions funding to the plan
Benefits paid to retirees
Actual return on plan assets
Increase in PBO due to changes in actuarial assumptions
Expected return on plan assets
Average service life of all employees years
On January the company amends the pension agreement resulting in a prior service cost of $ The company uses straightline 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:
Prepare Pension worksheet for the year and in Excel. Make sure to include all accompanying computations at the bottom of the worksheet such as amortization of gainlosses
Prepare the necessary journal entries for each year associated with the defined benefits pension plan for HRC
What different amounts balances will be reported in the income statement and balance sheet at the end of year and
Is the pension plan underfunded or overfunded at the end of based on your computations?
Based on your answer for requirement does HRC needs to increase or decrease the contributions to the pension plan in future assuming no immediate changes in actuarial assumptions? Why?
What journal entry would be recorded by HRC at the end of and if it was a defined contributions plan instead of defined benefits pension plan with the contribution from employer of $ and $ in and respectively? Which of the two pension plans is a better choice for the HRC company and Why?
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