Reference no: EM131819396
Problem 1- Measuring and Recording Pension Expense
Presented below is information related to the pension plan of Vector Inc. for the year 2013.
1. The service cost of pension expense is $450,000.
2. The projected benefit obligation and the accumulated benefit obligation at the beginning of the year are $570,000 and $525,000, respectively. The settlement rate is 10%.
3. The expected return on plan assets is 9%. The actual return on plan assets is $49,000.
4. The unrecognized prior service cost at the beginning of the year is $260,000. The average remaining service-life of the employees is 5 years.
5. At the beginning of the period, the fair value of pension plan assets is $525,000.
6. The company had an unrecognized net loss at the beginning of the period of $170,000. Any amortization of unrecognized net loss is recognized on a straight-line basis over the average remaining service-life of the employees.
7. The contribution made to the pension fund in 2013 was $435,000. Benefits paid from the fund in 2013 totaled $85,000.
Instructions:
1. Determine the pension expense to be reported on the income statement for 2013. Show all computations. Round all computations to nearest dollar.
2. Prepare the journal entry to record pension expense for 2013.
3. Determine the projected benefit obligation at December 31, 2013.
4. Determine the fair value of plan assets at December 31, 2013.
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