On January 1, 2007 the Smith Company adopted a defined benefit pension plan. At that time the company awarded retroactive benefits to its employees, resulting in an unrecognized prior service cost that created a projected benefit obligation of $1,250,000 on that date. The company decided to amortize the unrecognized prior service cost by the straight-line method over the 20-year average remaining service life of its active participating employees. The company’s actuary has also provided the following additional information for 2007 and 2008:

(1) Service cost: 2007, $147,000; 2008, $153,000;

(2) Expected return on plan assets: 2008, $34,000; and

(3) Projected benefit obligation: 1/1/2008, $1,522,000. The discount rate was 10% in both 2007 and 2008. The company contributed $340,000 and $350,000 to the pension fund at the end of 2007 and 2008, respectively. There are no other components of Smith Company’s pension expense; ignore any additional pension liability.

Required

1. Compute the amount of Smith Company’s pension expense for 2007 and 2008.

2. Prepare the journal entries to record the pension expense for 2007 and 2008.