Question - Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2010 in which no benefits were paid.
The actuarial present value of future benefits earned by employees for services rendered in 2010 amounted to $56,000.
The company's funding policy requires a contribution to the pension trustee amounting to $145,000 for 2010.
As of January 1, 2010, the company had a projected benefit obligation of $900,000, an accumulated benefit obligation of $800,000, and a balance of $400,000 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The actual and expected return on plan assets was $54,000. The settlement rate was 9%. No gains or losses occurred in 2010 and no benefits were paid.
Amortization of prior service cost was $50,000 in 2010. Amortization of net gain or loss was not required in 2010.
(a) Determine the amount of the components of pension expense that should be recognized by the company in 2010.
(b) Prepare the journal entries to record pension expense and the employer's contribution to the pension trustee in 2010.
(c) Indicate the amounts that would be reported on the income statement and the Balance Sheet for the year 2010.