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.

2019 spreadsheet

2019 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, 2019	(25,000)	20,000	100	4,500			(5,000)
Service cost	(800)				800		(800)
Interest cost	(2,500)				2,500		(2,500)
Prior Service Cost	(200)		200				(200)
Expected return on assets		2,000			(2,000)		2,000
Adjust for: Gain (loss) on assets		400		(400)			400
Amortization of: "Prior service cost-AOCI"			(10)		10
Amortization of: "Net Loss (Gain)-AOCI"				(200)	200
Gain (Loss) on PBO	7000			(7,000)			7,000
Cash funding		1,000				(1,000)	1,000
Retiree benefits	950	(950)
Bal., Dec. 31, 2019	(20,550)	22,450	290	(3,100)	1,510		1,900

Fill in the blanks for the 2020 pension 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							1,900
Service cost							(900)
Interest cost
Prior Service Cost							(400)
Expected return on assets		2,470			(2,470)
Adjust for: Gain (loss) on assets		449
Amortization of: "Prior service cost-AOCI"
Amortization of: "Net Loss (Gain)-AOCI"
Gain (Loss) on PBO	(400)
Cash funding							1,200
Retiree benefits	1,100
Bal., Dec. 31, 2020							2,224

Answer 1

Fill in the blanks for the 2020 pension 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
Work note
Amortization of net loss:
Net Loss-AOCI	3100
Corridor: 10% X $20550	2055
Excess	1045	(3100-2055)
Average Service life	10	years
2020 amortization	104.5	(1045/10)
Amortization of prior service cost	=290 X 10%
	29