Question

Herring Wholesale Company has a defined benefit pension plan. On January 1, 2018, the following pension related data were available:

	($ in 000s)
Net gain–AOCI	$349
Accumulated benefit obligation	3,070
Projected benefit obligation	3,100
Fair value of plan assets	2,600
Average remaining service period of active employees (expected to remain constant for the next several years)	13	years

The rate of return on plan assets during 2018 was 9%, although it was expected to be 10%. The actuary revised assumptions regarding the PBO at the end of the year, resulting in a $42,000 decrease in the estimate of that obligation.

Required:

1. Calculate any amortization of the net gain that should be included as a component of net pension expense for 2018.
2. Assume the net pension expense for 2018, not including the amortization of the net gain component, is $344,000. What is pension expense for the year?
3. Determine the net loss—AOCI or net gain—AOCI as of January 1, 2019.

Answer 1

	Particulars	($ In 000s)
1	Net gain–AOCI	349
	Less
	10% PBO	-310
	Excess at the beginning of the year	39	{a}
	Average service revenue period	13	{b}
	Amortization of the net gain	3	{a}/{b}
2	Pension expense	344
	Less : Amortization expenses	-3
		341
3	Net gain AOCI	349
	Add
	Gain on PBO	42
	Less
	Loss on plan	-26	=2600*(10-9)%
	Amortization expenses	-3
		362