Rebek Corporation provides the following information about its defined benefit pension plan for the year 2011:

Rebek Corporation provides the following information about its defined benefit pension plan for the year 2011:

Service cost ……………………………………………………………    $ 225,000

Contribution to the plan ……………………………………………….    262,500

Past service cost amortization ………………………………………….   25,000

Actual and expected return on plan assets ……………………………    160,000

Benefits paid    …………………………………………………………    100,000

Accrued pension liability at Jan. 1, 2011 ……………………………      25,000

Plan assets at Jan. 1, 2011 …………………………………………….     1,600,000

Accrued benefit obligation at Jan. 1, 2011 ……………………………     2,000,000

Unrecognized past service cost balance at Jan. 1, 2011 ……………….    375,000

Settlement rate ………………………………………………………..       10%

Rebek uses the deferral and amortization approach to account for its defined benefit plan.

Instructions

(a) Prepare a continuity schedule for 2011 for the accrued benefit obligation.

(b) Prepare a continuity schedule for 2011 for the plan assets.

(c) Calculate pension expense for the year 2011.

(d) Prepare all pension journal entries recorded by Rebek in 2011.

(e) What pension amount will appear on Rebek’s balance sheet at December 31, 2011?

(a) Accrued benefit obligation, 1/1/11         $2,000,000   

Interest cost ($2,000,000 x 10%)              200,000    

Service cost                                  225,000    

Benefits paid out                           (100,000 )

ABO, 12/31/11                              $2,325,000

(b)             Plan assets, 1/1/11                      $1,600,000

    Expected return on assets                     160,000

    Contributions                                 262,500

    Benefits paid out                           (100,000 )

Plan assets, 12/31/11                                 $1,922,500

(c)           Pension expense 2011:

Service cost                                 $225,000

Interest on accrued benefit obligation               200,000

Expected return on plan assets               (160,000 )  

Past service cost amortization                           25,000

                                             $290,000

(d) Pension Expense...................... 290,000

Accrued Pension Asset/Liability..         290,000

    Accrued Pension Asset/Liability...... 262,500

Cash.............................         262,500

(e) Pension liability, 1/1/11                    $ 25,000

Contributions                                (262,500 )  

Pension expense                              290,000

Pension liability, 12/31/11                          $ 52,500

Alternatively, the amount could also be reconciled as follows:

    Accrued benefit obligation                 $(2,325,000 )

    Plan assets at fair value                    1,922,500

    ABO in excess of plan assets (or funded status)  (402,500   )

    Unrecognized past service cost ($375,000 – $25,000)  350,000

    Accrued pension liability                   $  (52,500)