On January 1, 2011, Diana Peter Company has the following defined benefit pension plan balances.
Projected benefit obligation $5,000,000
Fair value of plan assets $5,000,000
The interest (settlement) rate application to the plan is 10%. On January 1, 2012, 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.
2011 2012
Service Costs $200,000 $180,000
Unrecognized prior service costs amortization -0- $90,000
Contributions (funding) to the plan $120,000 $185,000
Benefits paid $180,000 $280,000
Actual return on plan assets $350,000 $260,000
Expected rate of return on assets 7% 6%
Instructions:
(a) Prepare a pension worksheet for the pension plan for 2011 and 2012.
(b) For 2012, prepare the journal entry to record pension-related amounts.
(c) Variation: Assume the 12/31/12 balance of the unrecognized gain/loss account is 800,000 CR, how much amortization is needed, if any, during 2013? What would the entry on the 2013 sheet be? Assume an average remaining service life of 12 years.