Melanie Vail Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2015, the following balances relate to this plan.
|Projected benefit obligation||
|Accumulated OCI (PSC)||
As a result of the operation of the plan during 2015, the following additional data are provided by the actuary.
|Service cost for 2015||
|Actual return on plan assets in 2015||
|Amortization of prior service cost||
|Expected return on plan assets||
|Unexpected loss from change in projected benefit obligation, due to change in actuarial predictions||
|Contributions in 2015||
|Benefits paid retirees in 2015||
Download the Excel Template linked at the bottom of this page, containing the spreadsheets you will need for this exercise.
- Use the spreadsheet Pensions to prepare a pension worksheet. On the pension worksheet, compute pension expense, pension asset/liability, projected benefit obligation, plan assets, prior service cost, and net gain or loss.
- Compute the same items as in (#1), assuming that the settlement rate is now 7% and the expected rate of return is 10%.
- Prepare the journal entry using the spreadsheet Journal Entries to record pension expense in 2015. You need to prepare journal entries for only #1 above.
- Indicate the reporting of the 2015 pension amounts in the income statement and balance sheet using the spreadsheet Pensions. You need to show financial statements’ presentations for only #1 above.