Question

The funded status of Hilton Paneling Inc.'s defined benefit pension plan and the balances in prior service cost and the net gain–pensions, are given below.

	($ in 000s)
		2021				2021
	Beginning Balances				Ending Balances
Projected benefit obligation	$	3,900			$	4,401
Plan assets		4,300				4,681
Funded status		400				280
Prior service cost–AOCI		400				350
Net gain–AOCI		440				377

Retirees were paid $251,000, and the employer contribution to the pension fund was $264,000 at the end of 2021. The expected rate of return on plan assets was 10%, and the actuary’s discount rate is 6%. There were no changes in actuarial estimates and assumptions regarding the PBO.

Required:
1. Determine the actual return on plan assets of 2021.
2. Determine the loss or gain on plan assets of 2021.
3. Determine the service cost of 2021.
4. Determine the pension expense of 2021.
5. Average remaining service life of active employees (used to determine amortization of the net gain).

(For all requirements, enter your answers in thousands (i.e. 200,000 should be entered as 200).)

Answer 1

1. Actual Return on Plan Assets.

Plan Assets Beginning of 2021	$4,300
Actual Return	?
Cash Contribution	$264
(-) Retiree Benefit	$(251)
And of 2021	$4,681

Actual Return = $4,681 - $4,300 - $264 + $251 = $368

2. Loss or Gain on Plan Asset

Expected Return	$430 ($4300 × 10%)
Actual Return	$(368)
Loss On Plan Asset	$62

3. Service Cost

PBO, Beginning of 2021	$3,900
Service Cost	?
Interest Cost	$234 ($3,900 × 6%)
Loss (Gain) on PBO	0
Less: Retiree Benefit	$(251)
And of 2021	$4,401

Service Cost = $4,401 - 3,900 - 234 + 251 = $518

4. Pension Expense

Service Cost	$518
Interest Cost	$234 ($3,900 × 6%)
Expected Return ($368 Actual + 62 loss)	$(430)
Amortization of;
Prior Service Cost AOCI	$50 ( $400- $350)
Net Gain AOCI	$(1) ($440 - $377 -62)
Pension Expenses	$371

5. Average Remaining Service Life of Active Employee.

Net Gain Jan 1	$440
10% of 4300	$430
Excess	$10
Amount Amortized	1
Average Service Period	10 Years