Question #1

Data:

unfunded PBO: $25,000

unrecognized prior service cost: $12,000

Net periodic pension cost: $8,000

In its 12/31/09 statemend of stockholders' equity, what amount should Hall report as accumulated other comprehensive income for pension liabilities before tax effects?

ANSWER is $17,000

--------------------

Question #2

Rose Corp., a publicly traded company, implemented a defined benefit pension plan for its employees on 01/02/08.  The following data are provided for 2009 and as of 12/31/09:

PBO: $400,000

ABO: $360,000

Plan Assets at FV: $362,000

Pension costs for 2009: $150,000

Pension contribution for 2009: $150,000

Assume that as of 01/01/09, Roses' pension plan was fully funded and there were no recorded pension assets or liabilities on the balance sheet.  Ignoring tax effects, which of the following entries would be needed to properly record the funding status of Rose's pension plan at 12/31/2009?

ANSWER IS :  a debit to other comprehensive income for $38,000

----------------------------

My question:  So in question #1, the pension cost for the year is included in the computation for the liability which ultimately affects the entry to OCI.  But in question #2, the cost for the year was not taken into consideration..... why?

This is what I think-

Q1- Because it has unfunded PBO $25,000 means you gotta show $25,000 accrused penstion liability on the B/S.

When the company came up with net periodic pension costs- the JE would be

Dr. Pension expense 8,000

Cr. Accrued pension liability 8,000

So we have to bring the pension liability up to $25000...we will have to do JE- so that the Accrued pension liability is up to $25,000.

Dr. OCI 17,000

Cr. Accrued pension liability 17,000

Q2- we don't have to consider pension costs of $150,000 becuase  the company incurred 150,000 pension costs and the company contributed $150,000 to the pension plan. JE-

Dr. Pension cost 150.000

Cr. Pension liability 150,000

DR. Pension liability 150,000

Cr. Cash 150,000

The only thing we have to consider is to have $38000 shown as pension liability on B/S..why? because the plan is underfunded by 12/31/09 -$38,000 (PBO 400,000-   plan assets at FV 362,000).

JE-

Dr. OCI 38000

Cr. Pension liability 38,000

Hope it helps...