Generous Co. Ltd. (Gen) operates a defined benefit pension plan that offers its employees an annual retirement income based on years of service and average of the final five years’ earnings prior to retirement. 

On January 1, 2019, Gen improved the pension benefits by increasing the percentage of the last five years’ earnings from 2.1% to 2.2%. This enhancement has been retroactively applied to all actively employed workers on January 1, 2019. The amendment gave rise to an increase in the accrued benefit obligation of $100,000 on January 1, 2019. 

On January 1, 2020, the balance of the accrued benefit obligation is $600,000 and the pension fund assets total $420,000. 

The following amounts relate to Gen’s pension plan experience as determined by annual valuations in 2020 and 2021:

Required:

a. Determine the balance of the net defined benefit pension asset or liability as at January 1, 2020. 

b. Using the above information, prepare the schedules to reconcile the opening and closing balances of pension assets and liabilities for 2020 and 2021. 

c. Calculate the pension expense to be recognized in 2020 and 2021, and show the individual components making up the pension expense. 

d. Record the journal entries for Gen’s pension in 2020 and 2021. 

e. Determine the balance of the net defined benefit pension liability as at December 31, 2020 and 2021. Reconcile these balances with the transactions recorded to this account in the two years.

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2020 $ 591,250 724,500 75,000 15,000 100,000 2021 $ 802,000 865,000 80,000 20,000 115,000 Plan assets at market value, December 31 Accrued benefit obligation, December 31 Pension benefits earned by employees during year Payments to retirees Funding contribution (at end of year) Expected return on assets and interest rate on obligations 10% *The company assumes that pension benefits are earned and paid evenly through the year. 10%