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Chapter 20: Q4Q. (page 1161)

The meaning of the term “fund” depends on the context in which it is used. Explain its meaning when used as a noun. Explain its meaning when it is used as a verb.

Short Answer

Expert verified

The fund refers to the amount of money needed by an organization to carry out its business activities or sustain itself in the competitive market. Without funds, an organizationcannot operate.

Step by step solution

01

“Fund” as a noun

The word “Fund,” when used as a noun refers to the period where the organization’s agency (funding) accumulates its total assets for the pension benefit for its employees when the amount of pension is due.

02

“Fund” as a verb

“Fund,” when used as a verb, refers to the duration where an organization is liable to pay a certain sum to its funding agency.

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Most popular questions from this chapter

Given the following items and amounts, compute the actual return on plan assets: fair value of plan assets at the beginning of the period \(9,500,000; benefits paid during the period \)1,400,000; contributions made during the period \(1,000,000; and fair value of the plan assets at the end of the period \)10,150,000.

At January 1, 2017, Hennein Company had plan assets of \(280,000 and a projected benefit obligation of the same amount. During 2017, service cost was \)27,500, the settlement rate was 10%, actual and expected return on plan assets were \(25,000, contributions were \)20,000, and benefits paid were $17,500. Prepare a pension worksheet for Hennein Company for 2017.

The actuary for the pension plan of Gustafson Inc. calculated the following net gains and losses. Incurred during the Year (Gain) or Loss 2017 \(300,000 2018 480,000 2019 (210,000) 2020 (290,000) Other information about the company’s pension obligation and plan assets is as follows. Projected Benefit Plan Assets As of January 1, Obligation (market-related asset value) 2017 \)4,000,000 $2,400,000 2018 4,520,000 2,200,000 2019 5,000,000 2,600,000 2020 4,240,000 3,040,000 Gustafson Inc. has a stable labor force of 400 employees who are expected to receive benefits under the plan. The total serviceyears for all participating employees is 5,600. The beginning balance of accumulated OCI (G/L) is zero on January 1, 2017. The market-related value and the fair value of plan assets are the same for the 4-year period. Use the average remaining service life per employee as the basis for amortization.

Instructions (Round to the nearest dollar.) Prepare a schedule which reflects the minimum amount of accumulated OCI (G/L) amortized as a component of net periodic pension expense for each of the years 2017, 2018, 2019, and 2020. Apply the “corridor” approach in determining the amount to be amortized each year.

Mancuso Corporation amended its pension plan on January 1, 2017, and granted $160,000 of prior service costs to its employees. The employees are expected to provide 2,000 service years in the future, with 350 service years in 2017. Compute prior service cost amortization for 2017.

At the end of the current period, Agler Inc. had a projected benefit obligation of \(400,000 and pension plan assets (at fair value) of \)350,000. What are the accounts and amounts that will be reported on the company’s balance sheet as pension assets or pension liabilities?
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