The following information is for the pension plan for the employees of Payne, In
ID: 2451888 • Letter: T
Question
The following information is for the pension plan for the employees of Payne, Inc. 12/31/14 12/31/15 Projected benefit obligation 3,100,000 4,000,000 Fair value of plan assets 3,130,000 3,630,000 AOCI – Net (gain) or loss (425,000) (480,000) Settlement rate 8% 8% Expected rate of return 7% 6% Payne estimates that the average remaining service life is 15 years. Payne's contribution was $520,000 in 2015 and benefits paid were $260,000.
Instructions (a) Calculate the interest cost for 2015. (b) Calculate the actual return on plan assets in 2015. (c) Calculate the unexpected gain or loss in 2015. (d) Calculate the corridor for 2015 and the amortization of the net gain for 2015.
Explanation / Answer
(a) Interest cost for 2015 = $ 3100000*8%
= $ 248000
(b) fair value of plan assets (31/12/15) = $ 3630000
fair value of plan assets ( 01/01/15) = $ 3130000
= $ 500000
Contribution = $(520000)
Benefit Paid = $ 260000
Actual return on plan assets = $ 240000
(c) Actual return on plan assets = $ 240000
expected return ($3130000*6%) = $ 187800
unexpected gain = $ 52200
(d) 3130000*.10 = $ 313000
$ 3100000*.10 = $ 310000
corridor is larger $ 313000
$ 425000-$313000 = $ 112000
$ 112000/15 = $ 7467 amortization of net gain
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