Question

Stanley-Morgan Industries adopted a defined benefit pension plan on April 12, 2021. The provisions of the plan were not made retroactive to prior years. A local bank, engaged as trustee for the plan assets, expects plan assets to earn a 10% rate of return. The actual return was also 10% in 2021 and 2022.* A consulting firm, engaged as actuary, recommends 5% as the appropriate discount rate. The service cost is $260,000 for 2021 and $350,000 for 2022. Year-end funding is $270,000 for 2021 and $280,000 for 2022. No assumptions or estimates were revised during 2021.

* We assume the estimated return was based on the actual return on similar investments at the inception of the plan and that, since the estimate didn't change, that also was the actual rate in 2022.

Required:
Calculate each of the following amounts as of both December 31, 2021, and December 31, 2022:

December 31, 2021 1. Projected benefit obligation 2. Plan assets 3. Pension expense 4. Net pension asset or net pension liability ision lability December 31, 2022 359,000 $ 340,000 $ 199,000 $ 13,000 +56,0 10,000 $

Answer 1

solution: projected benefit obligation So Balance, Jan 1, 2021 seonice cost 260000 Interest cost (50% o) Benefitspaid (0) Balance, Dec 31,2021 $260000 service cost 350000 13000 Interest cost (s%. * 260000) Benefits paid Balance, Dec 31, 2022 $623000

plan assets $0 Balance, Jan 1, 2021 Actual plan assets return on (10%.80) 270000 contributions, 2021 Benefits paid Balance Dec 31, 2021 & 270000 Actual returson planassets. (10% *270000) 27000 Contributions, 2022 280000 Benefits paid (8577000 Balance, Dec 31, 2022 pension expense - 2021 260000 service cost Interest cost (5%.Xo) Expected retush on the plan assets (10r.ro) pension expense $260000

pension expense -2022 350000 13000 service cost Interest cost 6% X260000) Expected return on the plan assets (10 X 270000) (2700) lorood $336000 pension expense 4) wet pension asset I liability. PBO 260000 plan assets 270000 Wet pension asser Dea31, 2011 $ 100D PBO 6230w plan assets 577000 Net pension asset Dec 31, 2012 $4.6000