Question

Larkspur 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		$1,470		$2,050
Accumulated benefit obligation		2,050		2,520
Projected benefit obligation		2,330		3,490
Plan assets (fair value)		1,530		2,790
Settlement rate and expected rate of return				10	%
Pension asset/liability		800		?
Service cost for the year 2017				370
Contributions (funding in 2017)				740
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

Answer :

a) Compute the actual return on the plan assets in 2017 :

Particulars	Amount
Ending plan asset	2790
Beginning plan assets	1530
Change in plan assets	=2790 - 1530 =1260
less.contributions	520 (1260 - 740=520)
Benefits paid	220
Actual return	740(520+220)

Actual Return on plan assets in 2017 is "740"

b)Compute the amount of the other comprehensive income (G/L) as of December 31, 2017 is :

   Case 1 :

Liablity G/L = PBO(closing) + BP - PBO(opening) - Interest cost - Service cost

= 3490 + 220 - 2330 - 233 - 470

= $ 677

Case 2 :

Unexpected return = PA(closing) + BP - PA(opening) - Contribution - Expected PA(beginning)

= 2790 + 220 - 1530 - 740 - 153

= $ 587

Therefore the amount of unexpected return value is 587

so Net pension liablity loss = Liablity G/L - Unexpected return

= $ 677 - $ 587

= $ 90

Therefore

The value of net pension liablity loss = 90

c)Compute the amount of net gain or loss amortization for 2017 :

Hallway approach is a materiality rule which is use to amortize the measure of actuarial increase or misfortune over the time frame either organizations utilizing distinctive bookkeeping techniques to record the addition or misfortune this strategy is set up to make consistency in organization revealing.

In passageway approach, the actuarial increase or misfortune is amortized over the period time just if the 10% of the more prominent of annuity advantage commitment and plan resources is not exactly the addition or losses.In the given issue, there is no opening addition or misfortunes thus, the hall approach isn't applicable.Therefore the measure of amortized addition or misfortune amid the period 2014 is $0

Therefore the amount of net gain or loss is $0

d)Compute pension expense for 2017 :

Pension expense = Interest cost + Service cost - Expected return on plan assets

= 233(2330 of 10%) + 470 - 153(1530 of 10 %)

= $ 550

Pension expense = $ 550