You are the auditor of Beaton and Gunter Inc., the Canadian subsidiary of a public multinational engineering company that offers a defined benefit pension plan to its eligible employees. Employees are permitted to join the plan after two years of employment, and benefits vest immediately. You have received the following information from the fund trustee for the year ended December 31, 2017:

Other relevant information:
1. The net defined benefit liability on January 1, 2017 is $2,312,500.
2. Employee contributions to the plan are withheld as payroll deductions, and are remitted to the pension trustee along with the employer contributions.
Instructions
(a) Prepare a pension work sheet for the company.
(b) Prepare the employer's journal entries to reflect the accounting for the pension plan for the year ended December 31, 2017.
(c) Prepare a schedule reconciling the plan's surplus or deficit with the pension amounts reported on the December 31, 2017 statement of financial position.
(d) Assume that interest rates are falling, and that the rate of compensation increase is expected to fall as well. Explain what effect this is likely to have on the surplus or deficit of the plan.

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Discount rate Rate of compensation increase 5% 3.5% Defined Benefit Obligation Defined benefit obligation at January 1, 2017 Current service cost Interest cost Benefits paid Actuarial loss, end of period Plan Assets Fair value of plan assets at January 1, 2017 Actual return on plan assets, net of expenses Employer contributions Employee contributions Benefits paid $11,375,000 425,000 568,750 756,250 631,250 9,062,500 1,125,000 493,750 81,250 756,250