Question

Bonita Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan.

		January 1, 2017		December 31, 2017
Vested benefit obligation		$1,390		$1,750
Accumulated benefit obligation		1,750		2,850
Projected benefit obligation		2,350		3,540
Plan assets (fair value)		1,820		2,550
Settlement rate and expected rate of return				10	%
Pension asset/liability		530		?
Service cost for the year 2017				440
Contributions (funding in 2017)				720
Benefits paid in 2017				220

(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.) (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

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 expense

$

Answer 1

	Bonita Company
a)
Formula:
Actual Return on the Plan Assets	(Actual return on plan assets at the end-Actual return on plan assets at the beginning-(Contribution margin-benefit paid)
Actual Return=
Actual Return at the end	$                                                    2,550.00
Less:Actual return at the beginning	$                                                  -1,820.00
Less: Contribution margin-Benefit paid	$                                                      -500.00
Actual return on the Plan Assets	$                                                       230.00
b)
Computation of Pension liability gains and losses and Pension assets gains and losses
Formula:
Pensiion liability gains and losses and pension assets gains and losses	Defined benefit obligation at the end-Defined benefit obligation at the beginning +Interest+Service cost-benefit paid
Pensiion liability gains and loss
Defined benefit paid at the end	$                                                    3,540.00
Less:Defined benefit paid at the beginning	$                                                  -2,350.00
Less:Interest	$                                                      -235.00
Less:Service cost	$                                                      -440.00
Add: Benefit paid	$                                                       220.00
Liability loss=(A)	$                                                       735.00
Pension Assets gains and loss
Actual fair value of Plan assets at the end	$                                                    2,550.00
less: Expected fair value of Plan assets at the beginning	$                                                  -1,820.00
Less:Interest revenue	$                                                      -182.00
Less: Contributions	$                                                      -720.00
Add: Benefit paid	$                                                       220.00
Assets gain=(B)	$                                                          48.00
Net loss=(A)+(B)	$                                                      -687.00
c) No gain or loss at the beginning of the period,so no amortization
d) Pension Expense
Service cost	$                                                       440.00
Interest cost	$                                                       235.00
Actual return on plan assets(As per a above)	$                                                      -230.00
Unexpected gain(Assets gain)	$                                                          48.00
Pension Expense	$                                                       493.00