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. (a) Identify the components of pension expense. Briefly explain the nature of each component.

(6 marks)

3. (b) Simpson Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2012.

1. The actuarial present value of future benefits earned by employees for services rendered in 2012

amounted to $56,000.

2. The companys funding policy requires a contribution to the pension trustee amounting to $145,000

for 2012.

3. As of January 1, 2012, the company had a defined benefit obligation of $900,000, an accumulated

benefit obligation of $800,000, and a balance of $40,000 in accumulated OCI (Loss). The fair value

of pension plan assets amounted to $600,000 at the beginning of the year. The discount rate was

9%. Actual return on plan assets was $60,000, and no benefits were paid.

Instructions

(a) Determine the amounts of the components of pension expense that should be recognized by the

company in 2012.(6 marks)

(b) Prepare the journal entry or entries to record pension expense and the employers contribution to

the pension trustee in 2012. (3 marks)

(c) Indicate the amounts that would be reported on the income statement and the statement of financial

position for the year 2012. (5 marks)

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