Husky Company maintains a defined benefit pension with First Hartford Trust. Bel

Question

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

Expense entry:

Particulars Plan liability Plan Asset Net Asset/(Liability) Pension expense Opening -520000 650000 130000 Settlement 52000 -52000 0 Current service cost -40000 0 -40000 40000 Actual earnings 62000 62000 Expected earnings -52000 Prior service cost 25000 Paid benefits 35000 -35000 0 Funding 80000 80000 Total -473000 705000 232000 13000

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