Pension Expense Worksheet
Response to the following problem:
When Turner Company adopted its defined benefit pension plan on January 1, 2010, it awarded retroactive benefits to its employees. These retroactive benefits resulted in a prior service cost of $980,000 that created a projected benefit obligation of the same amount on that date (which it did not fund). The company decided to amortize the prior service cost using the years-of-future-service method. The company's actuary and funding agency have provided the following additional information for 2010 and 2011:
(1) service cost: 2010, $187,000; 2011, $189,000;
(2) plan assets: 1/1/2010, $0; 1/1/2011, $342,000;
(3) expected long-term (and actual) rate of return on plan assets: 2011, 9%;
(4) discount rate for both 2010 and 2011: 8%; and
(5) amortization fraction for prior service cost: 2010, 80/980; 2011, 79/980.
The company contributed $342,000 and $336,000 to the pension fund at the end of 2010 and 2011, respectively. No retirement benefits were paid in either year. There are no other components of Turner Company's pension expense. Ignore any adjustment of accumulated other comprehensive income.
Required:
Prepare a pension plan worksheet that includes the calculation of the Turner 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.