Coronado Company sponsors a defined benefit pension plan. The corporation’s actu

Question

Coronado 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.

(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).)

(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 $1,470 $2,050 Accumulated benefit obligation 2,050 2,520 Projected benefit obligation 2,330 3,490 Plan assets (fair value) 1,530 2,790 Settlement rate and expected rate of return 10 % Pension asset/liability 800 ? Service cost for the year 2017 370 Contributions (funding in 2017) 740 Benefits paid in 2017 220

Explanation / Answer

Answer: a. Compute the actual return on the plan assets in 2017. Plan asset, end of the year $                2,790 Less: Plan asset, beginning of the year $                1,530 Net increase $                1,260 (2790-1530) Less: Contribution $                      740 Less: Benefit $                      220 $                   520 (740-220) Actual return $                   740 (1260-520) b. Projected benefit obligation 31 Dec, 2017 $                3,490 Less: Projected benefit obligation 1 Jan, 2017 $                  2,330 Add: Interest $                      233 (2330*10%) Add: Service cost $                      370 Less: Benefit Paid $                    (220) $                2,713 Liability loss $                   777 (3490-2713) c. Plan asset, end of the year $                2,790 Less: Plan asset, beginning of the year $                  1,530 Add: Expected return $                      153 (1530*10%) Add: Contribution $                      740 Less: Benefits paid $                    (220) $                2,203 Net gain $                   587 Net Gain/Loss $                   190 (777-587) c. The amount of net gain or loss amortization for 2017 (corridor approach). Amortization of loss =(190-233)/10 years 0 Maximum amount (10% corridor) 10% * 2330 Or 10% * 1530 = 233 d. Computation of pension expense for the year 2016 Service Cost $                370.00 Interest cost $                233.00 Expected return on asset $              (153.00) Amortization of net gain $                         -   Pension expense for the year $                450.00

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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