Question

Required

a. Compute amortization of Accumulated OCI—Pension Gain/Loss for 2020 using the corridor approach.

b. Compute the balance in Accumulated OCI—Pension Gain/Loss on December 31, 2020.

c. Compute amortization of Accumulated OCI—Pension Gain/Loss for 2021 using the corridor approach.

On January 1, 2020, K. Crew Inc. reported a $6,000 credit balance in its Accumulated OCI—Pension Gain/Loss account related to its pension plan. During 2020, the following events occurred.

Actual return on plan assets was $8,000, and expected return on plan assets was $10,000.

A gain on the PBO of $4,000 was determined by the actuary at December 31, 2020, based on changes in actuarial assumptions.

K. Crew amortizes unrecognized gains and losses using the corridor approach over the average remaining service life of active employees (20 years for 2020 and 2021).

Further information on this plan follows.

Jan 1, 2020 Dec 31, 2020

PBO $50,000 $56,000

Fair value of plan assets $30,000 $34,000

Thank you.

Answer 1

	Projected			End yr	Beg Yr
	benefit	Plan	Calc	Net	Acc	Minimum
Year	obligation	Asset	Corridor	Gain/Loss	OCI	Amortization
2020	50000	30000	-5000	4000	6000	550
2021	56000	34000	-5600		4000	507.5

Note
Avg remaining service	20yrs
Min Amorization amount
(Begn of Yr AOCI)-(Calc corridor)/ average remaining service
Corridor amount
10% of the larger value of "PBO" and "Plan Asset"