The question that you have to answer :

1- How do you find 35,000 for actual earnings on plan assets?

2- How did find 40,000 for interest on liability?

3- How did he find (40,000) for estimated earnings on plant assets?

4- Make a worksheet for the problem

Problem #2

Presented below is information related to Major Department Stores, Inc. pension plan for 2016.

Accumulated benefit obligation (at year-end)$650,000

Service cost520,000

Funding contribution for 2016600,000

Settlement rate and estimated return on plan assets8%

Actual return on plan assets7%

Amortization of PSC (due to benefit increase)100,000

Amortization of net gains48,000

Projected benefit obligation (at beginning of period)500,000

Fair market value of plan assets (at beginning of period)500,000

Payments made to retirees250,000

Instructions

(a)Compute the amount of pension expense to be reported for 2016. (Show computations.)

(b)Determine the plan assets as of 12/31/2016.

(c)Determine the projected benefit obligation as of 12/31/2016.

Pension Expense

Service Cost

520,000

Interest on Liability

40,000

Estimated Earnings on Plan Assets

(40,000)

Amort of PSC

100,000

Amort of G/L

(48,000)

Total Expense

572,000

PBO Reconciliation

Beginning PBO

(500,000)

Service Cost

(520,000)

Interest on Liability

(40,000)

Payments to Retirees

250,000

Ending PBO

(810,000)

Plan Assets Reconciliation

Beginning Plan Assets

500,000

Actual Earnings on Plan Assets

35,000

Contributions

600,000

Payments to Retirees

(250,000)

Ending Plan Assets

885,000