Reference no: EM133151215
Question - MITEL Inc is a high-tech company in Ottawa. Over the past 5 years, competition has fierce for talent in the Ottawa region. In order to attract and retain talent, they have a defined benefit pension plan in order to differentiate themselves from their competitors. During the year, MITEL hired a consultant to help with some long-term strategies to retain talent. One of the recommendations was to increase the retirement income for retirees by 10% in order to align these benefits with the industry standard. MITEL decided to implement this recommendation retrospectively with an effective date of April 1, 2021. This resulted in an increase to the defined benefit obligation by $120,000. On Jan 1, 2020, the balance of the defined benefit obligation is $1,000,000 and the pension fund asset total $880,000. The company made contributions of $400,000 and $500,000 to the plan on July 1, 2020 and 2021 respectively. MITEL paid out benefits of $19,000 and $23,000 uniformly throughout the 2020 and 2021 years respectively. Per the actuarial report, defined benefit obligation were $650,000 in 2020 and $710,000 in 2021 and the fair market value of the plan asset were $800,000 in 2020 and $723,000 in 2021. Throughout the year, employees earned pension benefits of $170,000 in 2020 and $180,000 in 2021. Interest rate on obligations and benefit that being $200,000 for 2020 and 2021 (there is therefore no effect of an asset ceiling).
a. Prepare the schedules (worksheet accounts) to reconcile the opening and closing balance of pension assets and obligations for 2020 and 2021 (including the funding asset).
b. For the year 2020 and 2021, show the individual components, which make up the pension expense?
c. Prepare journal entries for MITEL INC's pension in 2020 and 2021?
d. Determine the balance of the net defined pension liability as at December 31, 2020 and 2021?
e. Provide effect of the pension on the comparative financial statements (SFP, P&L, SCF) for 2020 and 2021?
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