MedPlus Ltd. initiated a one-person pension plan in January 2012 that promises the employee a pension...

MedPlus Ltd. initiated a one-person pension plan in January 2012 that promises the employee a pension on retirement according to the following formula: pension benefit = 2.5% of final salary per year of service after the plan initiation. The employee began employment with MedPlus early in 2009 at age 33, and expects to retire at the end of 2035, the year in which he turns 60. His life expectancy at that time is 21 years. Assume that this employee earned an annual salary of $40,000 when he joined MedPlus, that his salary was expected to increase at a rate of 4% per year, and that this remains a reasonable assumption to date. MedPlus considers a discount rate of 6% to be appropriate.

Required:

1. What is the employee’s expected final salary?

2. What amount of current service cost should MedPlus recognize in 2017 relative to this plan?

3. What is the amount of the accrued benefit obligation at December 31, 2017?

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

ABC Ltd initiated a one-person pension plan in January 2012 that promises the employee a pension...

ABC Ltd initiated a one-person pension plan in January 2012 that promises the employee a pension on retirement according to the following formula: pension benefit = 2.5% of final salary per year of service after the plan initiation. The employee began employment with ABC Ltd early in 2009 at age 33, and expects to retire at the end of 2035, the year in which he turns 60. His life expectancy at that time is 21 years. Assume that this employee...

Rico Corporation initiated a defined benefit pension plan on January 1, 2020. The plan does not...

Rico Corporation initiated a defined benefit pension plan on January 1, 2020. The plan does not provide any retroactive benefits for existing employees. The pension funding payment is made to the trustee on December 31 of each year. The following information is available for 2020 and 2021. 2020 2021 Service cost $75,000 $82,500 Funding payment (contribution) 85,000 92,500 Interest on projected benefit obligation 7,500 Actual and expected return on plan assets 9,000 Financial Statement Presentation and Entries Pension Worksheet a....

Company A's pension plan had the following balances on January 1, 2012 Balances, Jan. 1, 2010...

Company A's pension plan had the following balances on January 1, 2012 Balances, Jan. 1, 2010 plan assets -$120,000 pension assets/liabilities-($22,000) projected benefit obligation-($142,000) accumulated OCI (PSC)- $42,000 (G/L)- $18,000 In 2012, Company A adjusted the actuarial assumptions of the plan, which increase the projected benefit obligation by $44,000. Service costs, and additional information regardingg the plan are summarized below. Pension Plan service cost- 28,400 amortization of prior service cost-0 amended prior service costs-(80,000) actual return on plan assets-40,000 contributions-82,000...

Question 1 In a defined contribution pension plan, the retirement benefits to the employee are not...

Question 1 In a defined contribution pension plan, the retirement benefits to the employee are not defined. True or False Question 2 Saved Employees are not allowed to make contributions to a defined contribution pension plan. True or False Question 3 Current service cost is usually the largest single component of pension expense under a defined benefit pension plan. True or False Question 4 In a defined contribution plan, employers run the risk of high pension contributions. True or False...

For 2019, Chanda is 36, single, and an active participant in a qualified employee pension plan....

For 2019, Chanda is 36, single, and an active participant in a qualified employee pension plan. Determine the maximum Roth IRA contribution that she can make in each of the following cases: a. Assume that she did not make any contributions to other IRA accounts during the year. When her adjusted gross income for the year is $66,000, Chanda is allowed to contribute $_6,000_ to her Roth IRA. b. When her adjusted gross income for the year is $125,000, Chanda...

On 1-1-2016, Michaelsen Corporation initiated a funded, noncontributory, defined benefit pension plan and gave employees credit...

On 1-1-2016, Michaelsen Corporation initiated a funded, noncontributory, defined benefit pension plan and gave employees credit for prior employment. The company complies with generally accepted accounting principles (GAAP). The actuary estimated the prior service cost to be $700,000 on 1-1-2016. Michaelsen contributed $600,000 to the pension fund on 1-1-2016, i.e., funded $600,000. The average remaining service period of current employees is approximately 6 years at all times. Service cost was $50,000 for 2016. The actual return on pension plan assets...

Pension Problem ABC Company had the following: The company adopts a pension plan on January 1,...

Pension Problem ABC Company had the following: The company adopts a pension plan on January 1, 2010. No retroactive benefits were granted to employees. The service cost for each year is 2010 $400,000; 2011 $420,000; 2012 $432,000. The projected benefit obligation at the beginning of each year is 2011 $400,000 and 2012 $840,000. The discount rate is 4%. The expected long-term rate of return on plan assets is 5% which is also equal to the actual rate of return. The...

What could cause an employee to have an over-contribution to the Canada Pension Plan or Employment...

What could cause an employee to have an over-contribution to the Canada Pension Plan or Employment Insurance?

What impact would the retirement of a highly compensated employee have on a money-purchase pension plan...

What impact would the retirement of a highly compensated employee have on a money-purchase pension plan assuming that the replacement employee is offered a significantly lower wage? Group of answer choices No effect Decrease employer contributions Increase employer contributions

In general, no longer do Social Security benefits and employee pension plan benefits cover enough of...

In general, no longer do Social Security benefits and employee pension plan benefits cover enough of the typical retiree’s expenses. More and more firms are discontinuing previous commitments to providing generous pension plans to employees. Two major types of employee retirement plans are a defined benefit plan and a defined contribution plan. Respond to the following in a minimum of 175 words: Discuss advantages and disadvantages of both retirement plans: defined benefit and a defined contribution. If you were allowed...

Subjects