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Van Persie Corp. sponsors a defined-benefit pension plan for its employees. The

ID: 2451960 • Letter: V

Question

Van Persie Corp. sponsors a defined-benefit pension plan for its employees. The following balances related to the plan exist on December 31, 2009.

Plan assets (market value)                              $450,000

Projected benefit obligation                              600,000

Pension asset/liability                                                   150,000 Cr.

Van Persie amends the pension plan, effective 1/1/2010, and the actuary informs Van Persie that the Prior Service Cost associated with the amendment equals $90,000.

As a result of the operation of the plan during 2010, the actuary provided the following additional data on December 31, 2010.

Service cost for 2010                                      $ 75,000

Actual return on plan assets in 2010                 45,000

Amortization of prior service cost                    20,000

Contributions in 2010                                     115,000

Benefits paid retirees in 2010                            70,000

Settlement rate                                                            7%

Expected return rate                                                    8%

Instructions

(a) Compute pension expense for Van Persie Corp. for the year 2010 by preparing the attached pension worksheet.

(b) Prepare the journal entry for pension expense.

General Journal Entries

Memo Record

Other Comprehensive Income

Items

Pension Expense

Cash

Prior Service Cost

Gains/Losses

Pension Asset/Liability

PBO

Plan Assets

150,000cr

1. Service cost

2. Interest

3.actual return

4. Amortized

Contributions

Benefits

General Journal Entries

Memo Record

Other Comprehensive Income

Items

Pension Expense

Cash

Prior Service Cost

Gains/Losses

Pension Asset/Liability

PBO

Plan Assets

150,000cr

1. Service cost

2. Interest

3.actual return

4. Amortized

Contributions

Benefits

Explanation / Answer

Van Persie Corp. sponsors a defined-benefit pension plan for its employees. The