Winona Corp’s defined benefit pension plan had an amendment as of January 1, 2014, that retroactively included benefits of $1,500,000. The
remaining service life of the employees impacted by this change is 10 years. Winona uses the straight-line method to amortize the prior service cost.
As of January 1, 2014, Winona had the following information related to its pension plan, including adjustments for the plan amendment:
|
Accrued/prepaid pension cost (credit) |
$3,790,000 |
|
Projected benefit obligation |
5,200,000 |
|
Accumulated other comprehensive income (debit) |
1,500,000 |
|
Fair value of plan assets |
1,410,000 |
|
Interest (discount) rate |
10% |
|
Expected rate of return on plan assets |
12% |
The actuary reported service cost of $600,000 in both 2014 and 2015. Annual payments to retirees totaled $90,000. The trustee of the plan
assets reported the actual rate of return to be 11% in 2014.
Winona’s annual year-end contribution to the plan equals the current years’ service cost less actual return on plan assets plus
interest growth of the projected benefit obligation and amortization of prior service costs and/or gains and losses as calculated for pension expense.
Required (a through gAcâŹÂŚ.see both pages below):
|
a. |
Compute Winona’s 2014 contribution. |
|
b. |
Compute Winona’s 2014 pension expense. |
|
c. |
Prepare the journal entry to record the pension expense and pension contribution. |
|
d. |
Compute the December 31, 2014 balance in Pension Benefit Obligation. Cha |
|
e. |
Compute the December 31, 2014 balance in Plan Assets. |
|
f. |
Prepare the adjusting journal entry to record the plan’s adjustment to other comprehensive income at December 31, 2014. |
|
g. |
Is Winona’s plan overfunded or underfunded, and by how much, as of December 31, 2014? |
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