Question

The following data are for the pension plan for the employees of Lockett Company.

12/31/14 1/1/14 12/31/15

Accumulated benefit $2,500,000 $2,600,000 $3,400,000 Obligation Projected benefit 2,700,000 2,800,000 3,700,000 Plan assets (at fair value) 2,300,000 3,000,000 3,300,000 AOCL – net loss 0 480,000 500,000 Settlement rate (for year) 10% 9% Expected rate of return (for year) 8% 7%

Lockett’s contribution was $420,000 in 2015 and benefits paid were $375,000. Lockett estimate that the average remaining service life is 15 years.

(a) What was Lockett’s 2015 actual return on plan assets?

(b) What amount, if any, of the AOCL-Net Loss is amortized in 2015

(c) What amount, if any, was Lockett’s actuarial gain or loss in 2015?

(d) What was Lockett’s service cost for 2015?

Answer 1

Answer:

Solution:
a The actual return on plan assets in 2015 was
.$255,000
($3,300,000 - $3,000,000) - $420,000 + $375,000 = $255,000
		Plan assets (at fair value)  12/31/15	$3,300,000
	Less:	Plan assets (at fair value)  12/31/14	$3,000,000
		Total A	$300,000
		Lockett’s contribution in 2015	($420,000)
		Benefits paid	$375,000
		Total B	($45,000)
Total A + Total B		The actual return on plan assets in 2015	$255,000
#2 Assume that the actual return on plan assets in 2015 was $265,000. The unexpected gain on plan assets in 2015 was
c. $55,000
($265,000 - ($3,000,000 X .07) = $55,000.)
Actual return on plan assets in 2015 was	$265,000
Plan assets (at fair value)  12/31/14	$3,000,000
	0.07
($3,000,000 X .07)	$210,000
The unexpected gain on plan assets in 2015 was	$265,000 - $210,000 = $55,000
The unexpected gain on plan assets in 2015 was	$55,000

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