Question

Monty 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			$1,950
Accumulated benefit obligation			1,950			2,800
Projected benefit obligation			2,270			2,750
Plan assets (fair value)			1,790			2,710
Settlement rate and expected rate of return						10	%
Pension asset/liability			480			?
Service cost for the year 2020						430
Contributions (funding in 2020)						650
Benefits paid in 202-						180

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

Actual return on the plan assets

$

(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).)

Net pension liability gains and losses

$

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

Net gain or loss amortization

$

(d) Compute pension expense for 2020.

Pension expense

$

Answer 1

a)

Particulars	Amount in $
Plan assets at Ending of the year	2,710
Less: Plan assets at beginning of the year	1,790
Change in Plan Assets	920
Less Frets Contribution	650
Add: Benefits Paid	180
Actual Return	450

b)

Particulars	Amount in $
Projected benefit obligation at Ending of the year	2,750
Less: Projected benefit obligation at beginning of the year	2,270
Less Service Cost	430
Less: Interest on opening PBO (2270X10%)	227
Add: Benefits Paid	180
Liability Cost	3
Plan assets at Ending of the year	2,710
Less: Plan assets at beginning of the year	1,790
Less: Expected Return @ 10%	179
Less: Contribution	650
Add: Benefits paid	180
Assets Gain	271
Net Gain or (Loss) (271-3)	268

C. Compute 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. Compute pension expense for 2020

Particulars	Amount in $
Service cost	430
Interest Cost (2270 X 10%)	227
Actual Return	(450)
Assets Gain	271
Pension Expense	478

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