The following defined benefit pension data of Datek Corp. apply to the year 2013:

Accrued benefit obligation, funding basis, 1/1/13 (before amendment)…..$280,000

Plan assets, 1/1/13…..…..…..…..…..…..…..…..…..…..…..…..…..…..…..273,100

Net defined benefit liability, 1/1/13…..…..…..…..…..…..…..…..…..…..…..6,900

On January 1, 2013, Datek Corp., through plan amendment,

grants prior service benefits having a present value of…..…..…..…..…..…..50,000

Discount rate and expected rate of return…..…..…..…..…..…..…..…..…..…..9%

Annual pension service cost…..…..…..…..…..…..…..…..…..…..…..…..….29,000

Contributions (funding)…..…..…..…..…..…..…..…..…..…..…..…..…..…27,500

Actual return on plan assets…..…..…..…..…..…..…..…..…..…..…..…..…26,140

Benefits paid to retirees…..…..…..…..…..…..…..…..…..…..…..…..……..20,000

The company uses the immediate recognition approach under ASPE.

Instructions

(a) Prepare a continuity schedule for the ABO for 2013.

(b) Prepare a continuity schedule for the plan assets for 2013.

(c) Calculate pension expense for 2013 and prepare the entry to record the expense.

(d) Identify the plan’s funded status as the asset or liability reported on the December 31, 2013 statement of financial position.

(e) Assume that Datek Corp. uses the deferral and amortization approach to account for its pension plan, and that the funding basis valuation and the accounting basis valuation for the ABO are the same at January 1, 2013. Calculate the pension expense for 2013 assuming that the prior service benefits will be amortized over five years.

(f) Reconcile the difference between the pension expense as calculated with the immediate recognition approach versus the deferral and amortization approach.

(g) From the perspective of a creditor, discuss the effect of using the immediate recognition approach versus the deferral and amortization approach to account for the company’s pension plan.