Flint Corp. has the following beginning-of-the-year present values for its proje

ID: 2511442 • Letter: F

Question

Flint Corp. has the following beginning-of-the-year present values for its projected benefit obligation and market-related values for its pension plan assets.

The average remaining service life per employee in 2016 and 2017 is 10 years and in 2018 and 2019 is 12 years. The net gain or loss that occurred during each year is as follows: 2016, $344,400 loss; 2017, $110,700 loss; 2018, $13,530 loss; and 2019, $30,750 gain. (In working the solution, the gains and losses must be aggregated to arrive at year-end balances.)

Using the corridor approach, compute the amount of net gain or loss amortized and charged to pension expense in each of the four years, setting up an appropriate schedule.

projected benefit obligation plan assets value 2016 $2,460,000 $2,337,000 2017 2,952,000 3,075,000 2018 3,628,500 3,198,000 2019 4,428,000 3,690,000

Explanation / Answer

Using the corridor approach, compute the amount of net gain or loss amortized and charged to pension expense in each of the four years, setting up an appropriate schedule.

Year

Projected Benefit Obligation (a)

Plan Assets

10% Corridor

Accumulated OCI (G/L) (a)

Minimum Amortization of Loss

2016

$2460000

$2337000

$246000

2017

2952000

3075000

307500

344400

3690

2018

3628500

3198000

362850

451410

7380

2019

4428000

3690000

442800

457560

1230

(a) As of the beginning of the year.

(b ) ($344400 – $307500) ÷ 10 years = $3690

(d) ($451410 – $362850) ÷ 12 years = $7380

(e) $451410 – $7380 + $13530 = $457560

(f) ($457560 – $442800) ÷ 12 years = $1230