Midterm 2

Question 1

Pension expense formula

Answer 1

service cost + interest cost - expected return +/- amort of PSC (usually add) +/- amort. of UGL (if gain subtract, if loss add)

Question 2

Pension interest cost formula

Answer 2

beginning PBO * interest rate

Question 3

Pension expected return formula

Answer 3

expected/required return % * beginning FV of assets

Question 4

PBO, ending formula

Answer 4

PBO, beginning
+ service cost
+ interest cost
+ PSC (if incured in the period, full PSC not amort. PSC)
- payments (made to retired ppl)
= PBO, ending

Question 5

Pension assets, ending formula

Answer 5

Assets, beginning
+ actual return
+ contributions
- payments (made to retired ppl)
= Assets, ending

Question 6

Cash in Pension journal entry

Answer 6

equal to contribution for the period

Question 7

Pension journal entry unexpected loss

Answer 7

Debit OCI(UGL), reduces gain

Question 8

Pension journal entry amortizing gain for UGL

Answer 8

Debit OCI(UGL), reduces the gain as the gain is amortized

Question 9

Pension journal entry of amortized PSC

Answer 9

Credit OCI(PSC) for the amortized amount

Question 10

Pension journal entry of UGL

Answer 10

if within 10% corridor, credit OCI(UGL) for the amount of unexpected gain or debit OCI(UGL) for the unexpected loss

Question 11

Pension journal entry of pension expense

Answer 11

debit the pension expense

Question 12

Full journal entry for valuation allowance

Answer 12

If between the years the valuation allowance becomes more negative (probably to the reverse if its the other way around) :

Debit income tax expense - current
Credit valuation allowance

Question 13

Service cost

Answer 13

calculated for 1 year of service
retirement annuity based on final salary
= (% * 1 * $$$)

PV at retirement based on annuity
= PV(%, # yrs retired, annuity PMT)

PV at present
= PV(%, yrs to present, PV at retirement)

Question 14

Pension unexpected gain/loss for the year formula

Answer 14

(actual % - required %) * actual assets