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SITUATION No. 2: Your employer is considering establishing a defined-benefit pension plan for you, initiating the plan in 2016. Under the proposed plan, you would receive an annual pension benefit equal to 2.1% of your final year's salary times the number of years you worked for your employer. The appropriate long-term interest rate for calculating the service cost and interest cost components of Pension Expense is 10.1%. The expected return on plan assets is the same as the long-term interest rate for calculating service cost and the interest component of pension expense. Your final-year salary is expected to be $580,100. You began work for your employer on January 1, 2009 and expect to retire on December 31, 2033. You will be given credit for and receive future pension payments for your experience (2009-2015) prior to the plan's initiation (prior service cost incurred). You will begin receiving annual pension payments on December 31, 2034 (the first payment is to be received one year after your retirement date). Based on actuarial tables, you expect to live 10 years after retirement, receiving 10 annual pension payments. The plan will be initiated for 2016. Each year at December 31, your employer will fund (put cash into the pension plan fund) the full amount of service cost for that year. In addition, at the end of each of the first 4 years the plan is in effect (2016-2019), your employer will add additional funding equal to 25% of the Prior Service Cost which was created in 2016 when you were given credit for prior years. In subsequent years after 2019, your employer will fund only the service cost component of pension expense. Assume all the above estimates and interest rates will be realized (No actuarial gains or losses or unexpected returns). Prepare a schedule that shows the annual pension expense (and the individual expense components) for each of the years worked under the pension plan, and the recorded Pension Asset/Liability at the end of each year worked. Inputs: Starting Work Date: Retirement Date: Number of Years Worked Annual Pension Benefit Percentage Long-Term Interest Rate Final Year's Salary Expected Annual Pension Payments after Retirement Initial Date of Plan 1/1/2009 12/31/2033 24 2.10% 10.10% $580,100 10 1/1/2016 Calculations: Solutions: Pension Worksheet General Journal Entries Items Annual Pension Expense Cash OCI- Prior Service Cost OCI- Gain/Loss Memo Record Projected Pension Asset / Benefit Liability Obligation Plan Assets