Directions: After reading the company’s background information in each scenario, complete the corresponding tasks.
Scenario 1:
Bright company has several employees. The employees are entitled to a pension, which is set up as a defined contribution plan. Based on a formula, the company is expected to contribute $750,000 to the pension plan this year.
Prepare the entry required if the company is able to contribute the entire $750,000.
Prepare the entry required if the company is only able to contribute $500,000.
Scenario 2:
Pull Company employs several employees. They have set up a new defined benefit plan with no retroactive benefits or costs incurred. Both the discount rate and expected rate of return are 10%. The service costs are as follows:
$700,000 for 2010,
$720,000 for 2011, and
$750,000 for 2012.
The company has decided to adopt a policy to fund the pension at an equal amount to the pension expense. The company expects to make retirement payments of $20,000 beginning in 2012.
Prepare the beginning balance of projected benefit obligation for 2010, 2011, and 2012.
Prepare the beginning balance of plan assets for 2010, 2011, and 2012.
Prepare the entry required to record the pension expense for each year (2010, 2011, and 2012).
Scenario 3:
Pull Company employs several employees. They have set up a new defined benefit plan with no retroactive benefits or costs incurred. Both the discount rate and expected rate of return are 10%. The service costs are as follows:
$700,000 for 2010,
$720,000 for 2011, and
$750,000 for 2012.
The company has decided to adopt a policy to fund the pension at an amount $5,000 more than the pension expense. The company expects to make retirement payments of $20,000 beginning in 2012.
Prepare the beginning balance of projected benefit obligation for 2010, 2011, and 2012.
Prepare the beginning balance of plan assets for 2010, 2011, and 2012.
Prepare the entry required to record the pension expense for each year (2010, 2011, and 2012).