Stanley-Morgan Industries adopted a defined benefit pension plan on April 12, 20
ID: 2392745 • Letter: S
Question
Stanley-Morgan Industries adopted a defined benefit pension plan on April 12, 2018. The provisions of the plan were not made retroactive to prior years. A local bank, engaged as trustee for the plan assets, expects plan assets to earn a 10% rate of return. A consulting firm, engaged as actuary, recommends 5% as the appropriate discount rate. The service cost is $320,000 for 2018 and $400,000 for 2019. Year-end funding is $330,000 for 2018 and $340,000 for 2019. No assumptions or estimates were revised during 2018. 10 points Required: Calculate each of the following amounts as of both December 31, 2018, and December 31, 2019: (Enter your answers in thousands (i.e., 200,000 should be entered as 200).) Answer is not complete. December 31, 2018 December 31, 2019 $320,000 S736,000 1. Projected benefit obligation 2. Plan assets 3. Pension expense Net pension asset or net pension liabilityExplanation / Answer
December 31, 2018
December 31, 2019
Projected Benefit Obligation
320
736
Plan Assets
330
703
Pension Expense
320
383
Net pension asset or net pension (liability)
10
(33)
Explaination
Balance, January 1, 2018 $0
Service cost 320
Interest cost (5% × $0) 0
Benefits paid (0)
Balance, December 31, 2018 $320
Service cost 400
Interest cost (5% × $320) 16
Benefits paid (0)
Balance, December 31, 2019 $736
Balance, January 1, 2018 $0
Actual return on plan assets (10% × $0) 0
Contributions, 2018 330
Benefits paid (0)
Balance, December 31, 2018 $330
Actual return on plan assets (10% × $330) 33
Contributions, 2019 340
Benefits paid (0)
Balance, December 31, 2019 $703
Pension expense – 2018
Service cost $320
Interest cost (5% × $0) 0
Expected return on the plan assets (10% × $0) 0
Pension expense $320
Pension expense – 2019 ($ in 000s)
Service cost $400
Interest cost (5% × $320) 16
Expected return on the plan assets (10% ×$330) (33)
Pension expense $383
PBO $320
Plan assets 330
Net pension asset, Dec. 31, 2018 $10
($ in 000s)
PBO $736
Plan assets 703
Net pension liability, Dec. 31, 2019 $33
December 31, 2018
December 31, 2019
Projected Benefit Obligation
320
736
Plan Assets
330
703
Pension Expense
320
383
Net pension asset or net pension (liability)
10
(33)
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