Widjaja Inc. has sponsored a non-contributory, defined benefit pension plan for its employees since 1990. Prior to 2010, cumulative net pension expense recognized equaled cumulative contributions to the plan. Other relevant information about the pension plan on January 1, 2010, is as follows.

1. The company has 200 employees. All these employees are expected to receive benefits under the plan. The average remaining service life per employee is 13 years. The average period to vesting past service costs is 10 years.

2. The defined benefit obligation amounted to €5,000,000 and the fair value of pension plan assets was €3,000,000. Unrecognized past service cost was €2,000,000.

On December 31, 2010, the defined benefit obligation was €4,750,000. The fair value of the pension plan assets amounted to €3,900,000 at the end of the year. A 10% discount rate and a 10% expected asset return rate were used in the actuarial present value computations in the pension plan. The present value of benefits attributed by the pension benefit formula to employee service in 2010 amounted to €200,000. The employer’s contribution to the plan assets amounted to €575,000 in 2010. This problem assumes no payment of pension benefits.

Instructions

(a) Prepare a schedule, based on the average remaining life per employee, showing the unrecognized past service cost that would be amortized as a component of pension expense for 2010, 2011, and 2012.

(b) Compute pension expense for the year 2010.

(c) Prepare the journal entries required to report the accounting for the company’s pension plan for 2010.

(d) Compute the amount of the 2010 increase/decrease in unrecognized net gains or losses and the amount to be amortized in 2010 and 2011.

(e) Prepare a schedule reconciling the funded status of the plan with the pension amounts reported in the financial statements as of December 31, 2010.