Capricious Co

Capricious Co.Ltd.(Cap)operates a defined benefit pension plan that offers its employees an annual retirement income based on years of service and average of the final five years' earnings prior to retirement.
On January 1,2015,Cap improved the pension benefits by increasing the percentage of the last five years' earnings from 2.1% to 2.2%.This enhancement has been retroactively applied to all actively employed workers on January 1,2015.The amendment gave rise to an increase in the accrued benefit obligation of $100,000 on January 1,2015.
On January 1,2016,the balance of the accrued benefit obligation is $600,000 and the pension fund assets total $520,000.
The following amounts relate to Cap's pension plan experience as determined by annual valuations in 2016 and 2017:

Required:
a.Determine the balance of the net defined benefit pension asset or liability as at January 1,2016.
b.Using the above information,prepare the schedules to reconcile the opening and closing balances of pension assets and liabilities for 2016 and 2017.
c.For the years 2016 and 2017,complete Cap's pension actuary report and show the individual components which make up the pension expense.
d.Record the journal entries for Cap's pension in 2016 and 2017.
e.Determine the balance of the net defined benefit pension liability as at December 31,2016 and 2017.

Correct Answer:

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