Question

The following information is for the pension plan for the employees of Sheridan, Inc. 12/31/20 12/31/21 Accumulated benefit obligation $2,760,000 $3,720,000 Projected benefit obligation 3,060,000 3,960,000 Fair value of plan assets 3,090,000 3,590,000 AOCI - Net (gain) or loss (385,000) (440,000) Settlement rate 7% 7% Expected rate of return 6% 5% Sheridan estimates that the average remaining service life is 15 years. Sheridan's contribution was $488,000 in 2021 and benefits paid were $240,000.

Calculate the interest cost for 2021. Interest cost for 2021 $

Calculate the actual return on plan assets in 2021. Actual return on plan assets for 2021 $

Calculate the unexpected gain or loss in 2021. Unexpected gain or loss in 2021 $

Calculate the corridor for 2021 and the amortization of the net gain for 2021. (Round answers to 0 decimal places, e.g. 5,275.) Corridor for 2021 $ Amortization of the net gain for 2021 $

Answer 1

Answer:
Interest Cost for 2021              = Beginning Projected benefit obligation x Discount rate              =    $ 3,060,000   x 7%	$ 214,200
Particulars	Amount (in $ )
Ending Fair value of plan assets	$ 3,590,000
Less: Beginning Fair value of plan assets	($ 3,090,000)
Less: Contributions	($ 488,000)
Add: Benefits paid	$ 240,000
Actual return on plan assets for 2021	$ 252,000
Particulars	Amount (in $ )
Actual return	$ 252,000
Less: Expected return               ( Beginning Fair value of plan assets x Expected rate of return )                ( $ 3,090,000 x 5% )	($ 154,500)
Unexpected gain	$ 97,500
Corridor for 2018        = 10% of Higher of Begining Fv of Plant Assets or beginning PBO        = 10 % x $ 3,090,000       =   $ 309,000
The amount of AOCI (net gain) amortized in 2018        = Beginning AOCI – net (gain) or loss (-) Amount of Corridor ) / Service life        = ( $ 385,000   (-)   $ 309,000 ) / 15 Years        =   $ 76,000 / 16 years        =    $ 4,750
Amortization of the net gain for 2021	$ 4,750