Question

Exercise 20-13 Wildhorse Company sponsors a defined benefit pension plan. The corporation's actuary provides the following information about the plan. January 1, 2017 $1,560 2,010 2,260 1,540 Vested benefit obligation Accumulated benefit obligation Projected benefit obligation Plan assets (fair value) Settlement rate and expected rate of return Pension asset/liability Service cost for the year 2017 Contributions (funding in 2017) Benefits paid in 2017 December 31, 2017 $2,010 2,820 3,630 2,560 10 % 720 400 730 200 (a) Compute the actual return on the plan assets in 2017. Actual return on the plan assets (b) Compute the amount of the other comprehensive income (G/L) as of December 31, 2017. (Assume the January 1, 2017, balance was zero.) Net pension liability gains and losses (c) Compute the amount of net gain or loss amortization for 2017 (corridor approach). Net gain or loss amortization (d) Compute pension expense for 2017. Pension expenses

Answer 1

(a) Actual Return 490 Working Notes: Plan assets 12/31/2017 Plan assets 01/01/2017 Increase in fair value Less: Contributions Add: Benefit Actual return 2,560 (1,540)| 1,020 (730) 200 490

Net pension liability gains and losses 608 2,260 Working Notes: Projected Benefit obligation 01/01/2017 Add: Interest cost (2,260 x 10%) Add: Service cost Less: Benefits paid 226 400 (200) 2,686 3,630 (944) Projected Benefit obligation 01/01/2018 Liability Increase 490 Actual return Less: Expected return (1,540 X 10%) (Plan assets 01/01/17 x 10%) Unexpected Gain (154) 336 608 Net pension liability gains and losses (944 - 336) (c) Net gain or loss amortization s As the other comprehensive income (G/L) was 'o' on 01/01/17. Hence no amortization required during the year.

(d) Pension expense 400 226 Working Notes: Service cost Interest cost Actual return Unexpected gain Pension expense (490) 336 472