Pension Expense Worksheet
Response to the following problem:
The Carpenter Company adopted a defined benefit pension plan for its employees on January 1, 2010. At the time of adoption, the pension contract provided for retroactive benefits for the company's active participating employees. These retroactive benefits resulted in a prior service cost of $1,860,000 that created a projected benefit obligation of the same amount on that date. The company decided to amortize the prior service cost by the straight-line method over the 20-year average remaining service life of the employees.
The following additional information is also available for 2010 and 2011:
(1) discount rate for both 2010 and 2011: 8%;
(2) company contribution (funded 12/31): 2010, $550,000; 2011, $530,000;
(3) expected long-term rate of return on plan assets: 9%;
(4) actual rate of return on plan assets, 10%;
(5) service cost: 2010, $257,000; 2011, $264,000; and
(6) plan assets: 1/1/2010, $0.
The company paid pension benefits of $30,000 each year. There are no other components of Carpenter Company's pension expense. Ignore any adjustment of accumlated other comprehensive income.
Required:
Prepare a pension plan worksheet that includes the calculation of the Carpenter Company's pension expense for 2010 and 2011, the reconciliation of the beginning and ending projected benefit obligation for 2010 and 2011, the reconciliation of the beginning and ending plan assets for 2010 and 2011, and the journal entry to record the pension expense at the end of 2010 and 2011, indicating whether each component is a debit or credit.