Thorp Inc. maintains a defined benefit pension plan for its employees. Pension plan balances as at January 1, 2020 include:
Projected Benefit Obligation (PBO), January 1, 2020 |
$ 600,000 |
Plan assets at market-related value, January 1, 2020 |
$ 550,000 |
Prior service cost (PSC- OCI)1 |
$ 150,000 |
Average remaining service period |
15 years |
Service cost |
$ 90,000 |
Expected returns on plan assets |
8% |
Actual returns earned on plan assets |
$40,000 |
Actuarial interest rate |
4% |
Contributions paid |
$ 150,000 |
Benefits to retirees in 2020 |
$ 100,000 |
Loss from change in actuarial assumption, December 31, 2020 |
$ 46,000 |
1 These prior service costs are from 2019 and already included in PBO on January 1,2020.
Required:
- Determine the pension expenses recognized in 2020.
- Prepare the journal entries to reflect the accounting for the pension plan for 2020.
- Prepare the ending balances (31 December 2020) for plan assets, PBO, and calculate net pension liability.
- What will be the expected impact of the current pandemic (Covid-19) on PBO?