Question - A Company has a defined benefit pension plan. The company receives the following information from its actuaries for 2017.
Projected Benefit Obligation Balance
January 1 $260,000,000
Service cost $40,000,000
Interest cost $26,000,000
Benefits paid to retirees
$20,000,000
Plan assets balance January 1, $290,000,000
Actual return on plant assets $22,000,000
Cash contribution to the plan by marrow $15,000,000, benefits paid to retirees $20,000,000
In addition the following information is provided:
1. Based on historical experience, the expected return on the plan asset has been 10%
2. The 2017 amortization of prior service costs is $8 million. Prior service cost was incurred in 2014 when the plan was amended
3. There is no balance in the OCI gain/loss account at January 1, 2017
Required:
1. Determine the pension expense for 2017.
2. Prepare the journal entries necessary to record the pension activity for the year. Specially explain whether the pension plan is over or underfunded at the end of 2017.