Force Co. has a non-contributory, defined benefit pension plan. Pension plan data to be used for accounting purposes for the 2015 year are as follows. An appropriate interest rate for long-term debt is 7%.
Plan assets at market value at January 1, 2015 $6,258,000
Actual earnings on the plan for 2015 81,000
Contributions to the plan 350,000
Current service costs 233,000
Benefits paid to retirees during the year 110,000
Actuarial revaluation in 2015 showed an decrease in the obligation due to changes in mortality (590,000)
New past service cost in 2015 due to a reduction in benefits (185,000)
Defined benefit obligation at January 1, 2015. 7,299,000
Required:
a) Calculate the net defined pension liability at January 1, 2015.
b) Calculate the net defined pension liability as of December 31, 2015 by calculating the defined benefit obligation and the fair value of plan assets. Show your work.
DBO, Jan. 1, 2015
Plan assets, Jan. 1,2015