Lewis Industries adopted a defined benefit pension plan on January 1, 2018. By making the provisions of theplan retroactive to prior years, Lewis incurred a prior service cost of $2 million. The prior service cost wasfunded immediately by a $2 million cash payment to the fund trustee on January 2, 2018. However, the cost isto be amortized (expensed) over 10 years. The service cost—$250,000 for 2018—is fully funded at the end ofeach year. Both the actuary’s discount rate and the expected rate of return on plan assets were 9%. The actualrate of return on plan assets was 11%. At December 31, the trustee paid $16,000 to an employee who retiredduring 2018.Required:Determine each of the following amounts as of December 31, 2018, the fiscal year-end for Lewis:1. Projected benefit obligation2. Plan assets3. Pension expense
Lewis Industries adopted a defined benefit pension plan on January 1, 2018. 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, 2018. However, the cost is
to be amortized (expensed) over 10 years. The service cost—$250,000 for 2018—is fully funded at the end of
each year. Both the actuary’s discount rate and the expected
rate of return on plan assets was 11%. At December 31, the trustee paid $16,000 to an employee who retired
during 2018.
Required:
Determine each of the following amounts as of December 31, 2018, the fiscal year-end for Lewis:
1. Projected benefit obligation
2. Plan assets
3. Pension expense
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