Question

A partially completed pension spreadsheet showing the relationships among the elements that constitute Carney, Inc.’s defined benefit pension plan follows. At the end of 2018, Carney revised its pension formula and incurred a prior service cost of $100 million. At the end of 2019, the pension formula was amended again, creating an additional prior service cost of $200 million. At the beginning of 2020, $400 million prior service cost was incurred. At the beginning of 2021, $300 million prior service cost was incurred. In 2018 - 2021, the actuary’s discount rate remained 10%, and the average remaining service life of the active employee group remained 10 years. The expected rate of return on assets was 10% in 2019, and increased by 1% each year.

2020 spreadsheet

2020 Pension spreadsheet ($ in millions)	(PBO)	Plan Assets	Prior Service Cost–AOCI	Net Loss (Gain) –AOCI	Pension Expense	Cash	Net Pension (Liability) / Asset
Balance, Jan. 1, 2020	-20550	22450	290	-3100			1,900
Service cost	-900				900		-900
Interest cost	-2095				2095		-2095
Prior Service Cost	-400		400				-400
Expected return on assets		2,470			-2,470		2,470
Adjust for: Gain (loss) on assets		449		-449			449
Amortization of: "Prior service cost-AOCI"			-29		29
Amortization of: "Net Loss (Gain)-AOCI"				-105	105
Gain (Loss) on PBO	-400			400			-400
Cash funding		1200				-1,200	1,200
Retiree benefits	1,100	-1100
Bal., Dec. 31, 2020	-23245	25469	661	-3254	659		2,224

1. Fill in blanks in the 2021 pension spreadsheet.

2021 Pension spreadsheet ($ in millions)	(PBO)	Plan Assets	Prior Service Cost–AOCI	Net Loss (Gain) –AOCI	Pension Expense	Cash	Net Pension (Liability) / Asset
Balance, Jan. 1, 2021							2,224
Service cost	(1,095)
Interest cost
Prior Service Cost
Expected return on assets
Adjust for: Gain (loss) on assets
Amortization of: "Prior service cost-AOCI"
Amortization of: "Net Loss (Gain)-AOCI"
Gain (Loss) on PBO
Cash funding							1,300
Retiree benefits	1,200	(1,200)
Bal., Dec. 31, 2021					442		3,176

Answer 1

2021 Pension spreadsheet ($ in millions)	(PBO)	Plan Assets	Prior Service Cost–AOCI	Net Loss (Gain) –AOCI	Pension Expense	Cash	Net Pension (Liability) / Asset
Balance, Jan. 1, 2021	$        (23,245)	$    25,469	$           661	$    (3,254)			$     2,224
Service cost	$          (1,095)				$         1,095		$    (1,095)
Interest cost (23245+300 = 23545*10%)	$          (2,355)				$         2,355		$    (2,355)
Prior Service Cost	$             (300)		$           300				$       (300)
Expected return on assets (25469*12%)		$      3,056			$        (3,056)		$     3,056
Adjust for: Gain (loss) on assets		$         646		$       (646)			$        646
Amortization of: "Prior service cost-AOCI" (661/10)			$           (66)		$              66
Amortization of: "Net Loss (Gain)-AOCI"				$          18	$             (18)
Gain (Loss) on PBO	$             (300)			$        300			$       (300)
Cash funding		$      1,300				$ 1,300	$     1,300
Retiree benefits	$            1,200	$    (1,200)
Bal., Dec. 31, 2021	$        (26,095)	$    29,271	$           895	$    (3,582)	$            442		$     3,176
Computation of Amortization of "Net Loss (Gain)-AOCI for the year 2021
Pension Expense		$          442
Less:
Service cost		$       1,095
Interest cost		$       2,355
Expected return on the plan assets		$     (3,056)
Amortization of past service cost		$           66
Amortization of "Net Loss (Gain)-AOCI		$          (18)
Computation of Adjust for: Gain (loss) on assets for the year 2021
Net Pension Asset/(Liability) (Debit)		$       3,176
Less:
Balance, Jan. 1, 2021 (Debit)		$       2,224
Service cost		$     (1,095)
Interest cost		$     (2,355)
Prior Service Cost		$        (300)
Expected return on the plan assets		$       3,056
Gain (Loss) on PBO		$        (300)
Cash funding		$       1,300
Adjust for: Gain (loss) on assets for the year 2021		$          646

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