Farley Incorporated Instituted a Defined Benefit Pension Plan for Its

Essay

Farley Incorporated instituted a defined benefit pension plan for its employees at the beginning of 2006. An actuarial method that is acceptable under GAAP indicates that the company should contribute $80,000 each year to the pension fund to cover the benefits that will be paid to the employees. Farley funded 80% in 2006 and 2007, 90% in 2008 and 2009, and 100 percent in 2010.
Required:
(1) Prepare the journal entries to accrue the pension liability and fund it for 2006 through 2010.
(2) Compute the balance in the pension liability account as of December 31, 2010.