Problem #1

On January 1, 2017, Pedroni Company has the following defined benefit pension plan balances.

Project Benefit Obligation $4,500,000

Fair Value of Plan Assets $4,200,000

The Interest (settlement) rate applicable to the plan is 10%. On January 1, 2018, the company amends its pension agreement so that prior service costs of $500,000 are created. Other data related to the pension plan are as follows.

2017 2018

Service Cost $150,000 $180,000

Prior service cost amortization 0 90,000

Contributions (funding) to the plan 240,000 285,000

Benefits Paid 200,000 280,000

Actual return on plan assets 252,000 260,000

Expected rate of return on assets 6% 8%

Instructions:

1. Prepare a pension worksheet for the pension plan for 2017 & 2018
2. For 2018 prepare the journal entry to record pension-related amounts