Question

Frank’s Corn Dog has the beginning of year present values for its projected benefit obligation and market-related values for its pension plan assets.

                                                                                                PBO                                       Plan Assets

                                                                2014                       $1,000,000                           $900,000

                                                                2015                       $1,250,000                           $1,100,000

                                                                2016                       $1,600,000                           $1,450,000

                                                                2017                       $2,100,000                           $2,000,000          

The average remaining service-life per employee in 2014 and 2015 is 8 years and in 2016 and 2017 is 11 years. The net gain or loss that occurred during each year is as follows:

                                2014                       $165,000             Gain

                                2015                       $40,000                 Gain

                                2016                       $30,000                 Loss

                                2017                       $15,000                 Loss

Using the corridor approach, compute the amount of net gain or loss amortized and charged to pension expense in each of the 4 years. Hint: In working the solution, the gains and losses denoted above must be aggregated to arrive at year-end balances.

Answer 1

Α B C D E F G н 1 Average remaining service life per employee is 8 years in 2014 and 2015 and 11 years in 2016 and 2017 2 3 Corridor = 10 percent of greater of projected benefit obligation 4 Projected benefit Minimum 5 Year obligation Plan assets corridor AOCI Amortization 2014 1000000 900000 100000 0 $ 2015 1250000 1100000 125000 165000| $5,000 2016 1600000 1450000 160000 200000|| $3,636 9 2017 2100000 2000000 210000 166364 $

А B C D E 1 Average remaining service life per employee is 8 years in 2014 and 2015 and 11 years in 2016 and 2017 2 3 Corridor = 10 percent of greater of projected benefit obligation 4. Minimum Amortization $ . 5 Year 6 2014 7 2015 8 2016 2017 Projected benefit obligation Plan assets corridor AOCI 1000000 900000 =B6*10% 0 1250000 1100000 =B7*10% 165000 1600000 1450000 =B8*10% =165000+40000-5000 2100000 2000000 =B9*10% =200000-3636-30000 =(165000-125000)/8 =(200000-160000/11 $ 10 11