At the end of the current year, Western Electric received the following information from its actuarial firm:
Pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,500,000
Postretirement benefits expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000
The pension plan is fully funded. Western Electric has funded only $50,000 of the nonpension postretirement benefits this year.
a. Prepare the journal entry to summarize pension expense for the entire year.
b. Prepare the journal entry to summarize the nonpension postretirement benefits expense for the entire year.
c. If the company becomes illiquid in future years, what prospects, if any, do today’s employees have of receiving the pension benefits that they have earned to date?
d. Does the company have an ethical responsibility to fully fund its nonpension postretirement benefits?