Question

Exercise 19-3 Sandhill Corporation provides the following information about its defined benefit pension plan for the year 2017: Current service cost Contribution to the plan Past service cost, effective December 31, 2017 Actual return on plan assets Benefits paid Net defined benefit liability at January 1, 2017 Plan assets at January 1, 2017 Defined benefit obligation at January 1, 2017 Interest/discount rate on the DBO and plan assets $226,000 263,500 26,000 160,000 110,000 401,000 1,600,000 2,001,000 10% Sandhill follows IFRS Prepare a continuity schedule for 2017 tor the defined benefit obligation. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (15).) Sandhill Corporation Continuity Schedule 2017

Answer 1

1. Defined benefit obligation

As at 01 Jan, 2017	$2,001,000
Current Service cost	$226,000
Past service cost	$26,000
Interest Expense (Note 1)	$200,100
Benefits paid	($110,000)
As at 31 Dec, 2017	$2,343,100

Note 1: Interest expense = Opening liability * 10% = $2,001,000 * 10% = $200,100

2. Plan assets

As at 01 Jan, 2017	$1,600,000
Contribution to the plan	$263,500
Return on plan assets	$160,000
Benefits paid	($110,000)
As at 31 Dec, 2017	$1,913,500

Note 1: Actual return on plan assets = Expected return on plan assets (10%). Accordingly, there will be no actuarial gains / losses.

3. Pension Expense for the year

Current Service cost	$226,000
Past service cost	$26,000
Interest Expense	$200,100
Return on plan assets	($160,000)
Net Pension expense	$292,100

4. Journal entry to record pension expense and contributions paid

(a) Pension Expense

Pension Expense A/c Dr. $292,100

To Defined Benefit Obligation A/c $292,100

(b)  Contributions paid

Plan Asset A/c Dr. $263,500

To Bank A/c $263,500

5. Financial Position as at 31 Dec, 2017

Defined benefit obligation	$2,343,100
Plan assets	($1,913,500)
Net Liability as at 31 Dec, 2017	$429,600