Practice Problem One
OCACC Corporation has a defined pension plan and received the following reports from their pension trust for 2017:
Pension Plan Obligations
Pension Plan Assets
Beginning balance
$13,675,000
Beginning balance
$8,010,000
Interest Cost on obligation
820,500
Actual income on plan assets
157,900
Current Service Cost
556,700
Contributions
1,030,000
Benefit payments
(134,800)
Benefit payments
(134,800)
FV of Obligation Dec 31
14,917,400
FV of Plan Assets Dec 31
9,063,100
OCACC's company records showed:
. I
OCACC's average employee will receive payments 20 years in the future and the yield on 20-year bonds is 6%.
Contributions and benefits were paid at the end of the year.
Required:
1. What is the position of the Pension Plan at 2016 year end?
2. Prepare a pension spreadsheet (a template has been provided on the next page) to determine the values for
the 2017 journal entries.
3. Prepare the journal entries for 2017
4. Illustrate that your journal entries resulted in the Dec 31, 2017 fair value being on the balance sheet.
5. Has the position of the pension plan improved? What happened during the year that contributed to the
current position?
