Reference no: EM132859633
Question - Kotex company operates a defined benefit pension plan. Valuations were completed with the following results. Kotex adopts IFRS.
December 31, 2021 December 31, 2020
Asset - market value $ 1,421,000 $ 1,595,000
Liabilities - actuarial value $ 1,510,000 $ 1,487,000
The discount rate used in the actuarial assumptions is 3%. In any year, the current service cost is 12% of the lower of (1) wages, salaries and commission expense; and (2) 80% of earnings. For the year ended December 31, 2021, salaries and commissions totaled $ 3,125,000 and 80% of earnings was $1,560,000.
A plan improvement of $ 18,000 was made at the beginning of 2021. The plan improvements were backdated for all members of the plan. Kotex has not made a payment to fund the plan improvement.
On June 1, 2021, Kotex paid a contribution of $ 34,000 to the defined benefit plan.
On December 31, 2021, Kotex transferred a group of employees to a defined contribution plan from the defined benefit plan. The actuary estimated this change reduced total pension liabilities by $ 350,000. As compensation, at the date of transfer, $ 150,000 of plan assets was transferred to the defined contribution plan.
Required -
1. Write down reconciliation schedule between the plan assets and liabilities at December 31, 2021.
2. Calculate the pension expense in 2021.
3. Prepare the journal entries in 2021 regarding the above transaction. (Pease include 1 entry to account for all the pension expense)
4. Calculate the balance of net defined benefit asset/liability account on December 31, 2021.