Problem - True Grit, Inc. presents the following information pertaining to its pension plan:
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|
2016
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2017
|
2018
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|
Service cost
|
|
$120,000
|
$150,000
|
|
Employer cash contribution
|
|
105,000
|
232,000
|
|
Fair value of plan assets (as of 12/31)
|
60,000
|
147,000
|
336,000
|
|
Projected benefit obligation (as of 12/31)
|
69,000
|
417,000
|
560,000
|
|
Additional prior service cost occurring in the year
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|
180,000
|
-
|
|
Benefits paid in the year
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|
21,120
|
58,960
|
|
Actual return on plan assets
|
|
3,120
|
15,960
|
Employer cash contributions are made at the end of each year. As of 12/31 of 2016, unamortized prior service cost and unamortized net gain/loss are 0.
The company uses an 8% discount rate. Expected return for its plan assets is 9.5%. For simplicity, an average remaining service life of 20 years is always used.
The company amortizes prior service cost on a straight-line basis over the average remaining service life.
The company uses the Corridor approach to recognize the minimum amount of amortization required for cumulative net gain/loss on a straight-line basis over the average remaining service life.
Required -
(1) Prepare the Pension Worksheet for 2017 and 2018.
(2) Show how to report the pension amount on the balance sheet as of December 31, 2018.