Problem:
Mount Co. has the following defined-benefit pension plan balances on January 1, 2008.
Projected Benefit Obligation - 4,500,000
Fair value of plan assets - 4,500,000
The interest (settlement) rate applicable to the plan is 10%. On January 1, 2009, the company amends its pension agreement so that prior service costs of $600,000 are created. Other data related to the pension plan are as follows.
2008
Service costs - 150,000
Prior service costs amortization - 0
Contributions (funding) to the plan - 150,000
Benefits paid - 220,000
Actual return on plan assets - 252,000
Expected rate of return on assets - 6%
2009
Service costs - 170,000
Prior service costs amortization - 90,000
Contributions (funding) to the plan - 184,658
Benefits paid - 280,000
Actual return on plan assets - 250,000
Expected rate of return on assets - 8%
Q1. Prepare a pension worksheet for the pension plan in 2008.
Q2. Prepare any journal entry(ies) related to the pension plan that would be needed at December 31,2008.
Q3. Prepare a pension worksheet for 2009 and any journal entry(ies) related to the pension plan as of December, 31, 2009.
Q4. Indicate the pension-related amounts reported in the 2009 financial statements.