Lewis Industries adopted a defined benefit pension plan on January 1, 2016. By making the provisions of the plan retroactive to prior years, Lewis incurred a prior service cost of $2 million. The prior service cost was funded immediately by a $2 million cash payment to the fund trustee on January 2, 2016. However, the cost is to be amortized (expensed) over 10 years. The service cost—$250,000 for 2016—is fully funded at the end of each year. Both the actuary’s discount rate and the expected rate of return on plan assets were 9%. The actual rate of return on plan assets was 11%. At December 31, the trustee paid $16,000 to an employee who retired during 2016. Required: Determine each of the following amounts as of December 31, 2016, the fiscal year-end for Lewis: 1. Projected benefit obligation 2. Plan assets 3. Pension expense
Lewis Industries adopted a defined benefit pension plan on January 1, 2016. By making the provisions of the plan
retroactive to prior years, Lewis incurred a prior service cost of $2 million. The prior service cost was funded
immediately by a $2 million cash payment to the fund trustee on January 2, 2016. However, the cost is to be
amortized (expensed) over 10 years. The service cost—$250,000 for 2016—is fully funded at the end of each
year. Both the actuary’s discount rate and the expected
return on plan assets was 11%. At December 31, the trustee paid $16,000 to an employee who retired during 2016.
Required:
Determine each of the following amounts as of December 31, 2016, the fiscal year-end for Lewis:
1. Projected benefit obligation
2. Plan assets
3. Pension expense
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