You have the following information related to Chalmers Corporation’s pension plan: Use the PV of 1, PVAD of 1, and PVOA of 1 tables where appropriate. (Use the appropriate factor(s) from the tables provided.) Defined benefit, noncontributory pension plan.
Plan initiation, January 1, 2017 (no credit given for prior service).
Retirement benefits paid at year-end with the first payment one year after retirement.
Assumed discount rate of 7%.
Assumed expected rate of return on plan assets of 9%.
Annual retirement benefit equals years of credited service × 0.02 × highest salary.

You have the following information for Frank Bullitt, the firm’s only employee:

Start date January 1, 2014
Expected retirement date December 31, 2031
Expected number of payments during retirement 20

Selected actual and expected salary levels:

Date Salary Level
January 1, 2014 $ 22,000
January 1, 2017 27,000
January 1, 2018 30,000
January 1, 2031 75,000

Required:

Calculate the service cost and the interest cost components of pension cost for 2017 and 2018.
Calculate the PBO at the end of 2017 and 2018.
Compute the fair value of plan assets for 2017 and 2018, assuming that $1,200 in contributions is made to the pension fund at the end of each year. There were no actuarial gains or losses during 2017 or 2018.
Compute funded status at December 31, 2017 and December 31, 2018.
Calculate pension expense for 2017 and 2018.
Prepare the required journal entries for 2017 and 2018.
Show how your answer for 2017 would change if the plan had granted credit for prior service.