Pearl Company sponsors a defined benefit pension plan. The corporation’s actuary

Question

Pearl Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan.

(a) Compute the actual return on the plan assets in 2017.

Actual return on the plan assets: $ ______

(b) Compute the amount of the other comprehensive income (G/L) as of December 31, 2017. (Assume the January 1, 2017, balance was zero.) (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Net pension liability gains and losses: $ ______

(c) Compute the amount of net gain or loss amortization for 2017 (corridor approach).

(d) Compute pension expense for 2017.

January 1, 2017 December 31, 2017 Vested benefit obligation $1,400 $2,080 Accumulated benefit obligation 2,080 2,970 Projected benefit obligation 2,420 3,550 Plan assets (fair value) 1,610 2,520 Settlement rate and expected rate of return 10 % Pension asset/liability 810 ? Service cost for the year 2017 410 Contributions (funding in 2017) 650 Benefits paid in 2017 190

Explanation / Answer

Answer:-

Given

a)

Actual Return On Plan Assets

Change in Plan Assets = Ending Plan Assets - Beginning Plan Asstes

= 2,520 - 1,610 = 910

Now,

Actual Return On Plan Assets = Change in Plan Asstes - Contributions + Benefits Paid

= 910 - 650 + 190 = 450

Hence,

Actual Return on Plan Assets = $450

b)

Net Pension Liability Gain or Loss

Hence

Net Pension Liability Gain/Loss = ($379)

c)

Amount of Net Gain/Loss Amortization for 2017 (corridor approach)

Note :- Because no net gain or loss existed at the beginning of the period, no amortization occurs

d)

Pension Expense for 2017

Pension Expense = Service Cost + Interest Cost - Expected Returns

= $410 + $242 - $161

= $491

Hence

Pension Expense for 2017 = $491

January 1, 2017 December 31, 2017 Vested benefit obligation $1,400 $2,080 Accumulated benefit obligation 2,080 2,970 Projected benefit obligation 2,420 3,550 Plan assets (fair value) 1,610 2,520 Settlement rate and expected rate of return 10% Pension asset/liability 810 ? Service cost for the year 2017 410 Contributions (funding in 2017) 650 Benefits paid in 2017 190

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

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