Griseta Limited sponsors a defined benefit pension plan for its employees, which it accounts for under ASPE. The following data relate to the operation of the plan for the year 2017:
1. The actuarial present value of future benefits earned by employees for services rendered in 2017 amounted to $56,000.
2. The company's funding policy requires a contribution to the pension trustee of $145,000 for 2017.
3. As at January 1, 2017, the company had a defined benefit obligation for accounting purposes of $1 million. The fair value of pension plan assets was $600,000 at the beginning of the year. The actual return on plan assets was $53,000, and the discount rate was 9%.
4. No benefits were paid in 2017.
Instructions
(a) Determine the pension expense that should be recognized by the company in 2017.
(b) Prepare the journal entries to record pension expense and the employer's payment to the pension trustee in 2017.
(c) Determine the plan's surplus or deficit position and the balance of the Net Defined Benefit Liability/Asset account at January 1, 2017 and at December 31, 2017.
(d) Prepare the required disclosures for the 2017 financial statements.
(e) Assume instead that Griseta Limited was required by regulation to determine an actuarial valuation of its defined benefit obligation for funding purposes and had adopted an accounting policy to use the funding basis DBO instead of the one developed for accounting purposes. The funding basis valuation on January 1, 2017 was $875,000. Explain how this would change your answers to parts (a) to (d) above, if at all.