Question

* Question 3 The actuary for the pension plan of Sweet Inc. calculated the following net gains and losses. Incurred during the Year (Gain) or Loss 2020 $300,500 2021 480,900 2022 (210,000) 2023 (290,500) Other information about the company’s pension obligation and plan assets is as follows. As of January 1, Projected Benefit Obligation Plan Assets (market-related asset value) 2020 $3,984,300 $2,395,500 2021 4,490,000 2,213,900 2022 4,980,800 2,580,400 2023 4,273,200 3,021,400 Sweet Inc. has a stable labor force of 400 employees who are expected to receive benefits under the plan. The total service-years for all participating employees is 6,800. The beginning balance of accumulated OCI (G/L) is zero on January 1, 2020. The market-related value and the fair value of plan assets are the same for the 4-year period. Use the average remaining service life per employee as the basis for amortization. Compute the minimum amount of accumulated OCI (G/L) amortized as a component of net periodic pension expense for each of the years 2020, 2021, 2022, and 2023. Apply the “corridor” approach in determining the amount to be amortized each year. (Round answers to 0 decimal places, e.g. 2,500.) Year Minimum Amortization of (Gain) Loss 2020 $enter a dollar amount rounded to 0 decimal places 2021 $enter a dollar amount rounded to 0 decimal places 2022 $enter a dollar amount rounded to 0 decimal places 2023 $enter a dollar amount rounded to 0 decimal places

Answer 1

Answer :-

The minimum amount of accumulated OCI (G/L) amortized for each of the years 2020, 2021, 2022, and 2023 by Apply the “corridor” approach in determining the amount to be amortized each year are as follows :-

Year	Cumulative ( Gain) or Loss incurred (Note - 1)	Projected Benefit Obligation (PBO)	Plan Assets	Corridor Approach (10% of PBO and 10% Plan Assets,which is higher is taken)	Net loss (Gain) (Note - 2)	Average Service Life (Note - 3)	Amortized Net loss (Gain) (Net loss or gain /Average service Life)
2020	$300,500	$3,984,300	$2,395,500	$398,430	$0	17years	$0
2021	$781,400	$4,490,000	$2,213,900	$449,000	$332,400	16years	$20,775
2022	$550,625	$4,980,800	$2,580,400	$498,080	$52,545	15years	$3,503
2023	$256,572	$4,273,200	$3,021,400	$427,320	$0	14years	$0

Note 1:-

Cumulative ( Gain) or Loss incurred :-

In 2020, we take the Net gain or loss incurred the during the year - $300,500

In 2021 - we take the Net gain or loss incurred during the year 2021- $480,900 + Year 2020 Net loss - $300,500

Amount = $781400

In 2022 = $781,400 amount for 2021 - Amortized loss $20,775 - Net gain incurred during the year $210,000

Amount =$781,400 - $20,775 - $210,000 = $550,625

In 2023 =same as above - $550,625 - $3,503 - 290,500 = $256,572

Note 2:- Net loss (gain) - Here if Corridor approach amount is higher than cumulative net loss (Gain) then enter 0 in the amount column. And if Corridor approach amount is less than cumulative net loss (Gain) and enter the difference amount in that column.

Note 3 :-

Total service years of all employees = 6,800

No.of employees = 400

Average service life = 6,800/400 =17 years

In each year one year will reduced.