Fudd’s Furniture Inc. sponsors a defined benefit pension plan for its employees.
As of January 1, 2019, the following balances are reported:
Defined benefit obligation$ 240,000
Plan assets (at fair value) 310,000
SFP, Accumulated OCI loss5,000
Information for the 2019 years is as follows:
- Current service cost ,000
- Plan amendment resulting in a past service cost increase$8,700
- Expected rate of return based on the long-term bond rate8%
- Actual return on plan assets$25,000
- Contributions to the benefit fund paid on Sept 30 $65,000
- Benefits to retired employees during the year$120,000
- Changes in actuarial assumptions resulted in an
- Fudd’s asset ceiling limit is $85,000
decrease in the defined benefit obligation$ 3,200
Required:
- Calculate the Net Defined Pension Liability/Asset final balance for December 31, 2019 independently using the individual elements of pension accounting. [7 marks]
- Prepare all necessary the pension journal entries for 2019. [5 marks]
- Calculate the balance in Accumulated OCI [1 mark]
- Discuss the long-term financial implications any organization of underfunding it’s pension plan.[2 marks]
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