1. Husky Company maintains a defined benefit pension with First Hartford Trust.
ID: 2565289 • Letter: 1
Question
1. Husky Company maintains a defined benefit pension with First Hartford Trust. Below are the balances reported by First Hartford on January 1, 2017:
Plan Benefit Obligation $520,000
Plan Assets $650,000
At the beginning of 2017, First Hartford informed Husky that its assumptions for the last five years have been off slightly, and they need to deposit an additional $150,000. Other matters for 2017 are:
The settlement rate is 10%.
The current service cost is $40,000.
Expected earnings are 8%.
Actual earnings are $62,000.
Prior service cost amortization is $25,000.
First Hartford Trust paid retirement benefits of $35,000.
Husky funded the plan $80,000.
Prepare the pension expense entry for 2017.
Determine the balance in the Pension Asset/Liability account stating if it is an asset or a liability.
Explanation / Answer
Pension Expense For the Year 2017 ($) Current Service Cost 40,000 Past Service Cost Amortization 25,000 Actuarial Loss to be recognised (Due to assumptions off Slightly) 1,50,000 Total 2,15,000 Pension Expense Entry Pension Expense DR 2,15,000 To Employee Costs/ P&L A/c 2,15,000 Plan Benefit obligation ($) Opening Balance 5,20,000 + Current Service Cost 40,000 Past Service Cost 25,000 Actuarial Loss to be recognised (Due to assumptions off Slightly) 1,50,000 - Benefits Paid -35,000 Closing Balance 2017 7,00,000 Plan Assets ($) Opening Balance 6,50,000 + Earnings 62,000 Contribution 80,000 - Benefits Paid -35,000 Closing Balance 2017 7,57,000 At the year end there will be a Balance in Pension Asset Account Since Plan Assets are $ 57,000 more than Pan Benefit Obligations
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