Exercise NO: 11

Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2014 in

Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2014 in which no benefits were paid.

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1. The actuarial present value of future benefits earned by employees for services rendered in 2014 amounted to $56,000.

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2. The company’s funding policy requires a contribution to the pension trustee amounting to $145,000 for 2014.

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3. As of January 1, 2014, the company had a projected benefit obligation of $900,000, an accumulated benefit obligation of $800,000, and a debit balance of $400,000 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The actual and expected return on plan assets was $54,000. The settlement rate was 9%. No gains or losses occurred in 2014 and no benefits were paid.

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4. Amortization of prior service cost was $50,000 in 2014. Amortization of net gain or loss was not required in 2014.

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Instructions

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(a) Determine the amounts of the components of pension expense that should be recognized by the company in 2014.

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(b) Prepare the journal entry or entries to record pension expense and the employer’s contribution to the pension trustee in 2014.

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(c) Indicate the amounts that would be reported on the income statement and the balance sheet for the year 2014.

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