1. Differentiate between the projected benefit obligation, the accumulated benefit obligation, and
the vested benefit obligation. Also, rank each measurement basis as to relative size (e.g., largest,
etc).
2. Dharma Initiative, Inc., has a defined benefit pension plan. Characteristics of the plan during
2013 are as follows:
($ in 000s)
PBO, 1 January 1,000
Plan Assets, 1 January 600
Prior Service Costs, 1 January 24
Service costs 150
Loss from change in actuarial assumption 44
Benefits paid 72
Actual return on plan assets 40
Contributions 120
Expected years of Service 12
The settlement rate and expected long-term rate of return on plan assets is 8%. There are no
AOCI balances related to pension gains/losses on 1 January 2013.
Required:
1. Calculate the pension expense for 2013.
2. Prepare the journal entry for 2013.
3. What amount will Dharma Initiative report in its 2013 balance sheet as a net pension asset or
net pension liability?
4. Prepare a rollforward of the PBO and Plan Assets.