Complete the following exercise. Label each question clearly. Brown Corp. provides a defined benefit pension plan for its employees. The balances below are on its books as of January 1, 2017.

Account Balance

Plan assets $480,000

Projected benefit obligation (PBO) $625,000

Accumulated OCI (Prior Service Cost) $100,000* *

Prior Service Cost has a debit balance on January 1, 2017.

The actuary has provided the following information:

2017 Service cost $90,000

Amortization of prior service cost $19,000

Settlement rate 9%

Actual return on plan assets in 2017 $57,000

Unexpected loss from change in PBO due to actuarial

predictions’ change $76,000

Contributions in 2017 $99,000

Benefits paid to retirees in 2017 $85,000

Required

1. Use the spreadsheet Pensions to prepare a pension worksheet. On the pension worksheet, compute pension expense, pension asset/liability, projected benefit obligation, plan assets, prior service cost, and net gain or loss. Recall that settlement rate is 9%.

2. Compute the same items as in (1), assuming that the settlement rate is now 7% and the expected rate of return is 10%. Hint: Simply change the interest cost to 7%; change actual/expected return to balance of plant asset on January 1, 2017*10%

3. Prepare the journal entry using the spreadsheet Journal Entries to record pension expense in 2017. 4. Indicate the reporting of the 2017 pension amounts in the income statement and balance sheet for Brown Corp. using the spreadsheet Pensions.