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Winona Corp Pension Plan Analysis: Calculation of Pension Expense, Contributions, and Funded Status

An analysis of Winona Corp's pension plan focusing on pension expenses, contributions, and fund status.

Claire Mitchell
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Winona Corp Pension Plan Analysis: Calculation of Pension Expense,Contributions, and Funded StatusWinona Corp's defined benefit pension plan had an amendment as of January 1, 2014, thatretroactively included benefits of $1,500,000. The remaining service life of the employeesimpacted by this change is 10 years.Winonauses the straight-line method to amortize the priorservice cost.As of January 1, 2014, Winona had the following information related to its pension plan,including adjustments for the plan amendment:Accrued/prepaid pension cost (credit)$3,790,000Projected benefit obligation5,200,000Accumulated other comprehensive income (debit)1,500,000Fair value of plan assets1,410,000Interest (discount) rate10%Expected rate of return on plan assets12%The actuary reported service cost of $600,000 in both 2014 and 2015.Annual payments toretirees totaled $90,000. The trustee of the plan assets reported the actual rate of return to be 11%in 2014.Winona's annual year-end contribution to the plan equals the current years’service cost lessactualreturn on plan assets plus interest growth of the projected benefit obligation andamortization of prior service costs and/or gains and losses as calculated for pension expense.Required(a through g….see both pages below):a.Compute Winona's 2014 contribution.

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Subject
Accounting

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