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Chapter 20: Q5Q. (page 1161)
What is the role of an actuary relative to pension plans? What are actuarial assumptions?
An actuary is a professional in an organization which collects, combines, and analyzes the data that affects an organization's decision. They are also responsible fordetermining the risk level.
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Kreter Co. provides the following information about its postretirement benefit plan for the year 2017. Service cost $ 45,000 Contribution to the plan 10,000 Actual and expected return on plan assets 11,000 Benefits paid 20,000 Plan assets at January 1, 2017 110,000 Accumulated postretirement benefit obligation at January 1, 2017 330,000 Discount rate 8% Instructions Compute the postretirement benefit expense for 2017
Hanson Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances related to this plan. Plan assets (market-related value) \(520,000 Projected benefi t obligation 700,000 Pension asset/liability 180,000 Cr. Prior service cost 81,000 Net gain or loss (debit) 91,000 As a result of the operation of the plan during 2017, the actuary provided the following additional data for 2017. Service cost \)108,000 Settlement rate, 9%; expected return rate, 10% Actual return on plan assets 48,000 Amortization of prior service cost 25,000 Contributions 133,000 Benefits paid retirees 85,000 Average remaining service life of active employees 10 years
Instructions Using the preceding data, compute pension expense for Hanson Corp. for the year 2017 by preparing a pension worksheet that shows the journal entry for pension expense. Use the market-related asset value to compute the expected return and for corridor amortization.
Gottschalk Company sponsors a defined benefit plan for its 100 employees. On January 1, 2017, the company’s actuary provided the following information. Accumulated other comprehensive loss (PSC) \(150,000 Pension plan assets (fair value and market-related asset value) 200,000 Accumulated benefit obligation 260,000 Projected benefit obligation 380,000 The average remaining service period for the participating employees is 10 years. All employees are expected to receive benefits under the plan. On December 31, 2017, the actuary calculated that the present value of future benefits earned for employee services rendered in the current year amounted to \)52,000; the projected benefit obligation was \(490,000; fair value of pension assets was \)276,000; the accumulated benefit obligation amounted to \(365,000. The expected return on plan assets and the discount rate on the projected benefit obligation were both 10%. The actual return on plan assets is \)11,000. The company’s current year’s contribution to the pension plan amounted to $65,000. No benefits were paid during the year. Instructions (a) Determine the components of pension expense that the company would recognize in 2017. (With only one year involved, you need not prepare a worksheet.) (b) Prepare the journal entry to record the pension expense and the company’s funding of the pension plan in 2017. (c) Compute the amount of the 2017 increase/decrease in gains or losses and the amount to be amortized in 2017 and 2018. (d) Indicate the pension amounts reported in the financial statement as of December 31, 2017.
Latoya Company provides the following selected information related to its defined benefit pension plan for 2017. Pension asset/liability (January 1) \( 25,000 Cr. Accumulated benefit obligation (December 31) 400,000 Actual and expected return on plan assets 10,000 Contributions (funding) in 2017 150,000 Fair value of plan assets (December 31) 800,000 Settlement rate 10% Projected benefit obligation (January 1) 700,000 Service cost 80,000 Instructions (a) Compute pension expense and prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2017. Preparation of a pension worksheet is not required. Benefits paid in 2017 were \)35,000. (b) Indicate the pension-related amounts that would be reported in the company’s income statement and balance sheet for 2017.
The following facts apply to the pension plan of Boudreau Inc. for the year 2017. Plan assets, January 1, 2017 $490,000 Projected benefi t obligation, January 1, 2017 490,000 Settlement rate 8% Service cost 40,000 Contributions (funding) 25,000 Actual and expected return on plan assets 49,700 Benefi ts paid to retirees 33,400 Instructions Using the preceding data, compute pension expense for the year 2017. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2017 and the year-end balances in the related pension accounts.
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