Gibbs Company has 200 employees who are expected to receive benefits under the c

ID: 2399979 • Letter: G

Question

Gibbs Company has 200 employees who are expected to receive benefits under the company's defined-b PROBLEM II1 enefit pension pian. The average remaining service life per employee is 10 years...The or the company's pension plan calculated the following net gains and iosses: actuary f For the Year Ended (Gain) Or Loss $500,000 2010 2011380,000 2012 (690,000) Prior to 2010, there was no unrecognized net gain or loss. Information about the company's projected benefit obligation and market-related (and fair) value of pian assets follows: 2012 Projected benefit obligation Fair value of plan assets $2,100,000 $2,340,000 $3,000,000 1,680,0002,860.000 2,550,000 Required: Based on the above information about Gibbs Company, prepare a schedule which reflects the amount of net gain or loss to be amortized by the company as a component of pension expense for the years 2010 and 2011. The company amortizes net gains or iosses using the straight-line method over the average service life of participating employees.

Explanation / Answer

Solution:

Year

PBO-Beginning

Plan assets

Corridor

Gain or loss

Amortization

2010

2,100,000

1,680,000

210,000

2011

2,340,000

2,860,000

286,000

500,000

21,400

2012

3,000,000

2,550,000

300,000

98,600

Working:

(500,000 - 286,000) / 10 = 21,400

500,000 - 380,000 - 21,400 = 98,600