Question

Exercise 20-13 Indigo Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, 2020 December 31, 2020 Vested benefit obligation $1,650 $1,750 Accumulated benefit obligation 1,750 2,750 Projected benefit obligation 2,250 2,770 Plan assets (fair value) 1,730 2,640 Settlement rate and expected rate of return 10 % Pension asset/liability 520 ? Service cost for the year 2020 440 Contributions (funding in 2020) 750 Benefits paid in 202- 210

(a) Compute the actual return on the plan assets in 2020.

(b) Compute the amount of the other comprehensive income (G/L) as of December 31, 2020. (Assume the January 1, 2020, balance was zero.) (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).

(c) Compute the amount of net gain or loss amortization for 2020 (corridor approach).

(d) Compute pension expense for 2020.

Answer 1

A. The actual return on the plan assets in 2020:

Particulars	Amount in $
Plan assets at Ending of the year	2,640
Less: Plan assets at beginning of the year	1,730
Change in Plan Assets	910
Less Frets Contribution	750
Add: Benefits Paid	210
Actual Return	370

B.  The amount of the other comprehensive income (G/L) as of December 31, 2020.

Particulars	Amount in $
Projected benefit obligation at Ending of the year	2,770
Less: Projected benefit obligation at beginning of the year	2,250
Less: Service Cost	440
Less: Interest on opening PBO (2250X10%)	225
Add: Benefits Paid	210
Liability Cost	65
Plan assets at Ending of the year	2640
Less: Plan assets at beginning of the year	1730
Less: Expected Return @ 10%	173
Less: Contribution	750
Add: Benefits paid	210
Assets Gain	197
Net Gain or (Loss) (197-65)	132

C. The amount of net gain or loss amortization for 2020 (corridor approach).

In the above question there is no any opening Accumulated net gain or loss exist. Hence, no amortization required

D. Pension expense for 2020.

Particulars	Amount in $
Service cost	440
Interest Cost (2250X10%)	225
Actual Return	(370)
Assets Gain	197
Pension Expense	492