On January 1, 2013, Baznik Company adopted a defined benefit pension plan. At that time, Baznik awarded retroactive benefits to certain employees. These retroactive benefits resulted in a prior service cost of $1,320,000 on that date (which it did not fund).
Baznik has six participating employees who are expected to receive the retroactive benefits. Following is a schedule that identifies the participating employees and their expected years of future service as of January 1, 2013: 2. Prepare all the journal entries related to Baznik’s pension plan for 2013 and 2014. For a compound transaction, if an amount box does not require an entry, leave it blank.
Baznik decided to amortize the prior service cost to pension expense using the years-of-future-service method. The following are the amounts of the components of Baznik’s pension expense, in addition to the amortization of the prior service cost for 2013 and 2014:
|Interest cost on projected benefit obligation||118,800||175,932|
|Expected return on plan assets||—||93,980|
Baznik contributed $939,800 and $913,000 to the pension fund at the end of 2013 and 2014, respectively.