Shelby Company instituted a defined benefit pension plan for its employees at the beginning of 2007. An actuarial method that is acceptable under generally accepted accounting principles indicates that the company should contribute $40,000 each year to the pension fund to cover the benefits that will be paid to the employees. Shelby funded 80 percent of the liability in 2007 and 2008, 90 percent in 2009 and 2010, and 100 percent in 2011.
REQUIRED:
a. Prepare the journal entries to accrue the pension liability and fund it for 2007, 2008, 2009, 2010, and 2011.
b. Compute the balance in the pension liability account as of December 31, 2011.