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ezto.mheducation.com 6. 10.00 points value Pension data for Barry Financial Serv

ID: 2509068 • Letter: E

Question

ezto.mheducation.com 6. 10.00 points value Pension data for Barry Financial Services Inc. include the following (S in 000s) Discount rate, 7% Expected return on plan assets, 10% Actual return on plan assets, 9% Service cost, 2016 January 1, 2016: Projected benefit obligation Accumulated benefit obligation Plan assets (fair value) Prior service cost-AOCI (2016 amortization, $40) Net gain-AOCI (2016 amortization, $8) There were no changes in actuarial assumptions December 31, 2016 Cash contributions to pension fund, December 31,2016335 Beneft payments to retirees, December 31, 2016 400 2,750 2,450 2,850 370 420 360 (For all requirements, enter your answers in thousands rounded to 1 decimal place (Le, 5,500 should be entered as 5.5)-) Required: 1. Determine pension expense for 2016. (Amounts to be deducted should be indicated with a minus Service cost Interest cost Expected return on assets Amortization of prior service cost Amorization of net gain Pension expense esc

Explanation / Answer

6)

Entries

1) Dr Pension Expense $340

Plan Assets $285

Amortization of net gain - OCI $8

Amortization of prior service cost - OCI $40

PBO $593

2) Loss -OCI 28.5

Plan Assets 28.5

3) Plan Assets 335

Cash 335

4) PBO 360

Plan Assets 360

Explanation

Expected return on assets = $216 actual, plus $24 loss*

* (10% × $2,850) – (9% × $2,850)

2.PBO ($400 service cost + $193 interest cost) = $593

Loss–OCI ($256.5 actual return on assets – $285 expected return) = $28.5

The amortization amounts are reported as other comprehensive income in the statement of comprehensive income

7)

8)

Pension Expense Service Cost $        400 Interest Cost ($2,750*7%) $        193 Expected Return on assets $      (285) Amortization of prior service cost $          40 Amortization of net gain $          (8) Pension Expense $        340