Chapter 20 Flashcards
Presented below is pension information related to Tyler, Inc. for the year 2008:
Service cost $72,000
Interest on projected benefit obligation 54,000
Interest on vested benefits 24,000
Amortization of prior service cost due to increase in benefits 12,000
Expected return on plan assets 18,000
The amount of pension expense to be reported for 2008 is
72,000 + $54,000 + $12,000 – $18,000 = $120,000
Koble, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2008.
Service cost $ 200,000
Contributions to the plan 220,000
Actual return on plan assets 180,000
Projected benefit obligation (beginning of year) 2,400,000
Market-related and fair value of plan assets (beginning of year) 1,600,000
The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2008 is
200,000 + ($2,400,000 × .10) – ($1,600,000 × .10) = $280,000
Presented below is information related to Marley Inc. pension data for 2008.
Service cost $900,000
Actual return on plan assets 210,000
Interest on projected benefit obligation 390,000
Amortization of unrecognized net loss 90,000
Amortization of unrecognized prior service cost 165,000
Expected return on plan assets 180,000
What amount should be reported for pension expense in 2008?
900,000 + $390,000 + $90,000 + $165,000 – $180,000 = $1,365,000
Randel, Inc. received the following information from its pension plan trustee concerning the operation of the company’s defined-benefit pension plan for the year ended December 31, 2007.
1/1/08 – 12/31/08
Market-related asset value – $4,200,000 – $4,500,000
Projected benefit obligation – 4,800,000 – 5,160,000
Accumulated benefit obligation – 840,000 – 1,020,000
Unrecognized net (gains) and losses – -0- – (90,000)
The service cost component of pension expense for 2008 is $360,000 and the amortization of unrecognized prior service cost is $60,000. The settlement rate is 10% and the expected rate of return is 9%. What is the amount of pension expense for 2008?
360,000 + $60,000 + ($4,800,000 × .10) – ($4,200,000 × .09) = $522,000
The following information for Monroe Enterprises is given below for 12/31/08:
Assets and obligations:
Plan assets (at fair value) $1,200,000
Market-related asset value 1,160,000
Accumulated benefit obligation 1,280,000
Projected benefit obligation 1,840,000
Amounts to be Recognized:
Prepaid/(accrued) pension cost at beginning of year (32,000)
Pension expense (240,000)
Contribution 216,000
Prepaid/(accrued) pension cost at end of year $ (56,000)
Unrecognized prior service costs $ 275,000
Unrecognized gains (net) (140,000)
What is the pension expense that Monroe Enterprises should report for 2008?
240,000
The following information for Monroe Enterprises is given below for 12/31/08:
Assets and obligations:
Plan assets (at fair value) $1,200,000
Market-related asset value 1,160,000
Accumulated benefit obligation 1,280,000
Projected benefit obligation 1,840,000
Amounts to be Recognized:
Prepaid/(accrued) pension cost at beginning of year (32,000)
Pension expense (240,000)
Contribution 216,000
Prepaid/(accrued) pension cost at end of year $ (56,000)
Unrecognized prior service costs $ 275,000
Unrecognized gains (net) (140,000)
What is the amount that Monroe Enterprises should report as Intangible Asset—Deferred Pension Cost as of December 31, 2008?
1,280,000 – $1,200,000 = $80,000
$80,000 – $56,000 = $24,000
The following information for Monroe Enterprises is given below for 12/31/08:
Assets and obligations:
Plan assets (at fair value) $1,200,000
Market-related asset value 1,160,000
Accumulated benefit obligation 1,280,000
Projected benefit obligation 1,840,000
Amounts to be Recognized:
Prepaid/(accrued) pension cost at beginning of year (32,000)
Pension expense (240,000)
Contribution 216,000
Prepaid/(accrued) pension cost at end of year $ (56,000)
Unrecognized prior service costs $ 275,000
Unrecognized gains (net) (140,000)
What is the amount that should be reported as the total liability related to pensions as of December 31, 2008?
24,000 + $56,000 = $80,000
The following information is related to the pension plan of King, Inc. for 2008.
Actual return on plan assets $200,000
Amortization of unrecognized net gain 82,500
Amortization of unrecognized prior service cost 150,000
Expected return on plan assets 230,000
Interest on projected benefit obligation 362,500
Service cost 800,000
Pension expense for 2008 is
800,000 + $362,500 – $230,000 – $82,500 + $150,000 = $1,000,000
Presented below is pension information for Welch Company for the year 2008:
Actual return on plan assets $24,000
Interest on vested benefits 15,000
Service cost 30,000
Interest on projected benefit obligation 21,000
Amortization of prior service cost due to increase in benefits 18,000
The amount of pension expense to be reported for 2008 is
30,000 + $21,000 + $18,000 – $24,000 = $45,000
Downing, Inc. received the following information from its pension plan trustee concerning the operation of the company’s defined-benefit pension plan for the year ended December 31, 2008.
- – 1/1/08 – 12/31/08
Projected benefit obligation – 11,400,000 – 11,760,000
Market-related asset value – 6,000,000 – 6,900,000
Accumulated benefit obligation – 2,400,000 – 2,760,000
Unrecognized net (gains) and losses – -0- – 240,000
The service cost component of pension expense for 2008 is $840,000 and the amortization of unrecognized prior service cost is $180,000. The settlement rate is 10% and the expected rate of return is 8%. What is the amount of pension expense for 2008
$840,000 + ($11,400,000 × .10) – ($6,000,000 × .08) + $180,000 = $1,680,000
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On January 1, 2008, Kinder Co. has the following balances:
Projected benefit obligation $2,100,000
Fair value of plan assets 1,800,000
The settlement rate is 10%.
Other data related to the pension plan for 2008 are:
Service cost $180,000
Amortization of unrecognized prior service costs 60,000
Contributions 300,000
Benefits paid 105,000
Actual return on plan assets 237,000
Amortization of unrecognized net gain 18,000
The balance of the projected benefit obligation at December 31, 2008 is
2,100,000 + $180,000 + ($2,100,000 × .10) – $105,000 = $2,385,000
On January 1, 2008, Kinder Co. has the following balances:
Projected benefit obligation $2,100,000
Fair value of plan assets 1,800,000
The settlement rate is 10%.
Other data related to the pension plan for 2008 are: Service cost $180,000
Amortization of unrecognized prior service costs 60,000
Contributions 300,000
Benefits paid 105,000
Actual return on plan assets 237,000
Amortization of unrecognized net gain 18,000
The fair value of plan assets at December 31, 2008 is
1,800,000 + $237,000 + $300,000 – $105,000 = $2,232,000
Gillum, Inc. has a defined-benefit pension plan covering its 50 employees. Gillum agrees to amend its pension benefits. As a result, the projected benefit obligation increased by $1,500,000. Gillum determined that all its employees are expected to receive benefits under the plan over the next 5 years. In addition, 20% are expected to retire or quit each year. Assuming that Gillum uses the years-of-service method of amortization for prior service cost, the amount reported as amortization of prior service cost in year one after the amendment is
50 + 40 + 30 + 20 + 10 = 150.
$1,500,000 ÷ 150 = $10,000/service yr.
10,000 × 50 = $500,000.
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Presented below is information related to Bitner Manufacturing Company as of December 31, 2008:
Projected benefit obligation in excess of plan assets $900,000
Unrecognized net gain 300,000
Unrecognized prior service cost 405,000
The amount to be reported as accrued pension cost at the end of 2008 is
900,000 + $300,000 – $405,000 = $795,000
Barkley Corporation received the following report from its actuary at the end of the year:
- – 12/31/07 – 12/31/08
Projected benefit obligation – $1,600,000 – $1,800,000
Market-related asset value – 1,400,000 – 1,420,000
Accumulated benefit obligation – 1,300,000 – 1,480,000
Fair value of pension plan assets – 1,380,000 – 1,440,000
Prepaid pension cost – 80,000 – 100,000
Assume that no prepaid or accrued pension cost exists on January 1, 2007.
The amount reported as the total pension liability at December 31, 2007 is
FV of assets > ABO
Barkley Corporation received the following report from its actuary at the end of the year:
- – 12/31/07 – 12/31/08
Projected benefit obligation – $1,600,000 – $1,800,000
Market-related asset value – 1,400,000 – 1,420,000
Accumulated benefit obligation – 1,300,000 – 1,480,000
Fair value of pension plan assets – 1,380,000 – 1,440,000
Prepaid pension cost – 80,000 – 100,000
Assume that no prepaid or accrued pension cost exists on January 1, 2007.
The amount reported as the total pension liability at December 31, 2008 is
1,480,000 – $1,440,000 = $40,000
The following information relates to Haywood, Inc.:
- – 12/31/07 – 12/31/08
Plan assets (at fair value) $1,260,000 – $1,824,000 Pension expense – 570,000 – 450,000
Accumulated benefit obligation – 1,620,000 – 1,884,000
Annual contribution to plan 600,000 – 450,000
Unrecognized prior service cost – 480,000 – 420,000
Prior to 2007, cumulative pension expense recognized equaled cumulative contributions
The amount reported as the total liability for pensions on the December 31, 2007 balance sheet is
1,620,000 – $1,260,000 = $360,000
The following information relates to Haywood, Inc.:
- – 12/31/07 – 12/31/08
Plan assets (at fair value) $1,260,000 – $1,824,000
Pension expense – 570,000 – 450,000
Accumulated benefit obligation – 1,620,000 – 1,884,000
Annual contribution to plan 600,000 – 450,000
Unrecognized prior service cost – 480,000 – 420,000
Total liability for pensions on the December 31, 2007 balance sheet is 360,000
Prior to 2007, cumulative pension expense recognized equaled cumulative contributions
The amount reported as an intangible asset on the December 31, 2007 balance sheet is
600,000 – $570,000 = $30,000 (prepaid pension cost)
$360,000 + $30,000 = $390,000
The following information relates to Haywood, Inc.:
- – 12/31/07 – 12/31/08
Plan assets (at fair value) $1,260,000 – $1,824,000 Pension expense – 570,000 – 450,000
Accumulated benefit obligation – 1,620,000 – 1,884,000
Annual contribution to plan 600,000 – 450,000
Unrecognized prior service cost – 480,000 – 420,000
Prior to 2007, cumulative pension expense recognized equaled cumulative contributions
The amount reported as the total liability for pensions on the December 31, 2008 balance sheet is
1,884,000 – $1,824,000 = $60,000
The following information relates to Haywood, Inc.:
- – 12/31/07 – 12/31/08
Plan assets (at fair value) $1,260,000 – $1,824,000
Pension expense – 570,000 – 450,000
Accumulated benefit obligation – 1,620,000 – 1,884,000
Annual contribution to plan 600,000 – 450,000
Unrecognized prior service cost – 480,000 – 420,000
2007 prepaid pension cost 30,000
Total Liability: 60,000
Prior to 2007, cumulative pension expense recognized equaled cumulative contributions
The amount reported as an intangible asset on the December 31, 2008 balance sheet is
450,000 – $450,000 = 0
60,000 + $30,000 (from prior year) = $90,000
Presented below is information related to Kluth Inc. as of December 31, 2008.
Unrecognized gains and losses $ 90,000
Projected benefit obligation 3,600,000
Accumulated benefit obligation 3,420,000
Vested benefits 1,620,000
Market-related asset value 3,330,000
Plan assets (at fair value) 3,384,000
Unrecognized prior service cost -0-
Assume that cumulative pension expense equaled pension funding through 2008
The amount reported as the total pension liability on Kluth’s balance sheet at December 31, 2008 is as follows:
3,420,000 – $3,384,000 = $36,000
Presented below is information related to Kluth Inc. as of December 31, 2008.
Unrecognized gains and losses $ 90,000
Projected benefit obligation 3,600,000
Accumulated benefit obligation 3,420,000
Vested benefits 1,620,000
Market-related asset value 3,330,000
Plan assets (at fair value) 3,384,000
Unrecognized prior service cost -0-
Assume that cumulative pension expense equaled pension funding through 2008
The amount reported as an intangible asset on Kluth’s balance sheet at December 31, 2008 is as follows:
Unrecognized prior service cost is zero.
Coble Company has a defined-benefit plan. At the end of 2008, it has determined the following information related to its pension plan:
Projected benefit obligation $700,000
Market-related asset value of pension plan 600,000
Accumulated benefit obligation 660,000
Accrued pension cost 35,000
Fair value of pension plan assets 610,000
The amount of the total pension liability that is reported in Coble’s balance sheet at the end of 2008 is
660,000 – $610,000 = $50,000
Presented below is pension information related to Marten Company as of December 31, 2008:
Accumulated benefit obligation $3,000,000
Projected benefit obligation 3,500,000
Market-related asset value 2,400,000
Plan assets (at fair value) 2,500,000
Accrued pension cost 300,000
Unrecognized prior service cost 100,000
The amount to be reported as Intangible Asset—Deferred Pension Cost as of December
3,000,000 – $2,500,000 – $300,000 = $200,000 (additional liability).
additional liability > unrecognized prior service cost.
Unrecognized prior service cost = $100,000
On January 1, 2008, Nen Co. has the following balances:
Projected benefit obligation $4,200,000
Fair value of plan assets 3,750,000
The settlement rate is 10%. Other data related to the pension plan for 2008 are:
Service cost $240,000
Amortization of unrecognized prior service costs 54,000
Contributions 270,000
Benefits paid 225,000
Actual return on plan assets 264,000
Amortization of unrecognized net gain 18,000
The balance of the projected benefit obligation at December 31, 2008 is
$4,200,000 + $240,000 – $225,000 + ($4,200,000 × .10) = $4,635,000
On January 1, 2008, Nen Co. has the following balances:
Projected benefit obligation $4,200,000
Fair value of plan assets 3,750,000
The settlement rate is 10%. Other data related to the pension plan for 2008 are:
Service cost $240,000
Amortization of unrecognized prior service costs 54,000
Contributions 270,000
Benefits paid 225,000
Actual return on plan assets 264,000
Amortization of unrecognized net gain 18,000
The fair value of plan assets at December 31, 2008 is
$3,750,000 + $264,000 + $270,000 – $225,000 = $4,059,000
Spencer Company has the following information at December 31, 2008 related to its pension plan:
Projected benefit obligation $4,000,000
Accumulated benefit obligation 3,200,000
Plan assets (fair value) 2,000,000
Accrued pension cost 300,000
The amount of additional pension liability Spencer Company would recognize at December 31, 2008 is
($3,200,000 – $2,000,000) – $300,000 = $900,000
Spencer Company has the following information at December 31, 2008 related to its pension plan:
Projected benefit obligation $4,000,000
Accumulated benefit obligation 3,200,000
Plan assets (fair value) 2,000,000
Accrued pension cost 300,000
What amount of additional pension liability would be recognized if Spencer Company had prepaid pension cost of $220,000 rather than accrued pension cost of $300,000?
($3,200,000 – $2,000,000) + $220,000 = $1,420,000.
The following pension plan information is for Ladd Company at December 31, 2008.
Projected benefit obligation $8,400,000
Accumulated benefit obligation 7,500,000
Plan assets (at fair value) 6,150,000
Market-related asset value 6,450,000
Unrecognized prior service cost 540,000
Pension expense for 2008 3,000,000
Contribution for 2008 2,400,000
Prior to 2008, cumulative pension expense equaled cumulative contributions. The amount to be reported as the total liability for pensions on the December 31, 2008 balance sheet
7,500,000 – $6,150,000 = $1,350,000
The following pension plan information is for Ladd Company at December 31, 2008.
Projected benefit obligation $8,400,000
Accumulated benefit obligation 7,500,000
Plan assets (at fair value) 6,150,000
Market-related asset value 6,450,000
Unrecognized prior service cost 540,000
Pension expense for 2008 3,000,000
Contribution for 2008 2,400,000
The amount to be reported as Intangible Asset—Deferred Pension Cost on the December 31, 2008 balance sheet is
540,000; limited to unrecognized PSC
The following facts relate to the Lional Co. post retirement benefits plan for 2008:
Service cost $170,000
Discount rate 9%
APBO, January 1, 2008 $1,500,000
EPBO, January 1, 2008 $2,000,000
Benefit payments to employees $115,000
The amount of post retirement expense for 2008 is
170,000 + $135,000 = $305,000
The following facts relate to the post retirement benefits plan of Ramsey, Inc. for 2008:
Service cost $680,000
Discount rate 8%
APBO, January 1, 2008 (transition amount) $4,000,000
EPBO, January 1, 2008 $4,800,000
Average remaining service to full eligibility 20 years
Average remaining service to expected retirement 25 years
The amount of post retirement expense for 2008 is
680,000 + $320,000 + $160,000 = $1,160,000
The following facts relate to the Albers Co. post retirement benefits plan for 2008:
Service cost $126,000
Discount rate 10%
EPBO, January 1, 2008 $1,095,000
APBO, January 1, 2008 $900,000
Actual return on plan assets in 2008 $31,500
Expected return on plan assets in 2008 $24,000
The amount of post retirement expense for 2008 is
126,000 + $90,000 – $31,500 + $7,500 = $192,000.
