RIBBY (BPP 2011 REVISION KIT )

Hello,

I am very much in a fix with question RIBBY (2011 BPP Revision Kit Q: No: 43).Adjustment (g) ‘Past Service Cost’ is the matter worrying me.

The entry in kit is

01-June-2007

Dr P/L (Retained Earnings) $3m
Dr Unrecognized past service cost $1m
Cr Present Value of Obligation (Non Current Liability) $4m

On 31-May-2008

Dr:P/L (Retained Earnings) $.5m
Cr: Unrecognized past service cost (Non Current Liability) $.5m

My doubt is $3 must immediately be charged to P/L. That I understood. But the treatment for the remaining $1m is causing me tension a lot.

Thanks in advance for your help tutor.

Regards
Jaison