Worksheet 2 ? Pensions The following information pertains to Waco Corp?s defined benefit pension plan Discount rate 7% Expected rate of return 9% Average service life 10 years At January 1, At December 31, 2011 2011 Projected benefit obligation $800,000 $1,220,000 Fair value of pension plan assets 960,000 1,080,000 Unrecognized prior service cost 280,000 Unamortized prior pension gain 108,000 Service cost for the current year was $90,000. There were no contributions made or benefits paid during the year. Waco?s unfunded accrued pension liability was $8,000 at January 1, 2011. Waco uses the straight-line method of amortization over the maximum period permitted. 1. Calculate the amounts to be recognized as components of Waco?s pension expense at December 31, 2011. Round all amounts to the nearest dollar. (Be sure to show all calculations in order to receive full credit) a. Interest cost b. Expected return on plan assets c. Actual return on plan assets d. Amortization of prior service cost e. Minimum amortization of pension gain included in accumulated other comprehensive income. 2. Determine whether the following components increase or decrease Waco?s pension liability. a. Service cost b. Deferral of gain on pension plan assets c. Actual return on plan assets d. Amortization of prior service cost e. Amortization of pension gain included in accumulated other comprehensive income. Worksheet 2 - Pensions The following information pertains to Waco Corp's defined benefit pension plan Discount rate Expected rate of return Average service life 7% 9% 10 years At January 1, 2011 Projected benefit obligation Fair value of pension plan assets Unrecognized prior service cost Unamortized prior pension gain At December 31, 2011 $800,000 960,000 280,000 108,000 $1,220,000 1,080,000 Service cost for the current year was $90,000. There were no contributions made or benefits paid during the year. Waco's unfunded accrued pension liability was $8,000 at January 1, 2011. Waco uses the straight-line method of amortization over the maximum period permitted. 1. Calculate the amounts to be recognized as components of Waco's pension expense at December 31, 2011. Round all amounts to the nearest dollar. (Be sure to show all calculations in order to receive full credit) a. b. c. d. e. Interest cost Expected return on plan assets Actual return on plan assets Amortization of prior service cost Minimum amortization of pension gain included in accumulated other comprehensive income. 2. Determine whether the following components increase or decrease Waco's pension liability. a. b. c. d. e. Service cost Deferral of gain on pension plan assets Actual return on plan assets Amortization of prior service cost Amortization of pension gain included in accumulated other comprehensive income