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 $51,000
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]
Sample Solution