Selected Information about the pension plan of Roman Co. is as follows: 12/31/14
ID: 2481450 • Letter: S
Question
Selected Information about the pension plan of Roman Co. is as follows:
12/31/14 12/31/15
Accumulated benefit obligation $4,700,000 $4,930,000
Projected benefit obligation 4,950,000 5,150,000
Accumulated OCI (PSC) 1,800,000 1,500,000
Fair value of plan assets 4,750,000 4,950,000
Pension expense 1,000,000 1,700,000
Contribution 985,000 1,350,000
Discount rate (for year) 9% 8%
Instructions
(a) What is the corridor for 2015? show calculations
(b) Calculate the pension asset / liability at December 31, 2015. show calculations
(c) Prepare the entry for 2015 to record the pension expense and contribution.
Explanation / Answer
$4,950,000@10% = $495,000
$4,750,000@10% = 475,000
So the higher of $495,000 is the corridor
Less:Fair value of plan assets (4,950,000)
Pension asset/ liability 200,000
Pension expense
1,700,000
To Cash
1,350,000
To OCI
300,000
To Pension asset/ liability
50,000
- Corridor for 2015
$4,950,000@10% = $495,000
$4,750,000@10% = 475,000
So the higher of $495,000 is the corridor
- PBO $5,150,000
Less:Fair value of plan assets (4,950,000)
Pension asset/ liability 200,000
- Journal entry
Pension expense
1,700,000
To Cash
1,350,000
To OCI
300,000
To Pension asset/ liability
50,000
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