1. How much pension expense (revenue) did Verizon report it its 2012 Income Stat

Question

1. How much pension expense (revenue) did Verizon report it its 2012 Income Statement?

2. What approximate rate of return did Verizon use in the expected return calculation for 2012?

3. What amount of asset or liability did Verizon report on the 2012 Balance Sheet in relation to its

pension plan?

4. How does overstating the expected rate of return on plan assets affect pension expense? How

does overstating the discount rate affect pension expense?

5. In 2012, the plan purchased an annuity contract from Prudential, the effect of which was to

transfer to Prudential the obligation to provide retirement benefits to approximately 41,000 retirees who began receiving pensions prior to 2010. The purchase did not affect the plan assets. Going forward, how will the annuity purchase affect interest cost and service cost?

6. Moody's Investors Service called the Verizon deal a “credit negative” for Prudential. What do you think is the reason for Moody’s concern?

Explanation / Answer

1)$5553. we cans ee it from net period cost 2012 year .

2)Expected retun(%)= expectd return in 2012/fair valued of plan assets in at end of 2011

=1795/24110=7.4%

3)Here it is net liability as liability is greather than assets

Pension assets=$18,282 pension laibility=$26,773

Net liability= 18282-26773=($8,491)

4)If discount rate is overstated then the required pendion expense to be paid come down and if in real time it came down there will be cash crunch

Same way overstating the expected return on plan asseta will decreas the cost associated with the plan.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.