San Francisco State University
Exercise 17-9
Requirement 1
($ in millions)
Service cost $20
Interest cost 12
Expected return on the plan assets ($9 actual, less $1 gain) (8)
Pension expense $24
Requirement 2
Pension expense (calculated above) 24
Plan assets (expected return on plan assets) 8
PBO ($20 service cost + $12 interest cost) 32
Plan assets 20
Cash (given) 20
Exercise 17-10
Requirement 1
($ in 000s)
Service cost $310
Interest cost (7% x $2,300) 161
Expected return on the plan assets ($216 actual, plus $24 loss*) (240)
Amortization of prior service cost 25
Amortization of net gain (6)
Pension expense $250
* (10% x $2,400) – (9% x $2,400)
Requirement 2
Pension expense (calculated above) 250
Plan assets (expected return on assets) 240
Amortization of net gain–OCI 6
Amortization of prior service cost–OCI 25
PBO ($310 service cost + $161 interest cost) 471
Plan assets 245
Cash (given) 245
The amortization amounts are reported as other comprehensive income in the statement of comprehensive income.
Exercise 17-12
Requirement 1
($ in 000s) Case 1 Case 2 Case 3
Net loss or gain $320 $330 $260
Less: 10% corridor (threshold)* – 331 270 170
Excess none $ 60 $ 90
Service period ÷ 12 15 10
Amortization none $ 4 $ 9
* 10% times either the PBO or plan assets (beginning of the year), whichever is larger
Requirement 2
($ in 000s) Case 1 Case 2 Case 3
January 1, 2009 $320 ($330) $260
2009 loss (gain) on plan assets (11) (8) 2
2009 amortization 0 4 (9)
2009 loss (gain) on PBO (23) 16 (265)
January 1, 2010 $286 ($318) ($ 12)
Note: The balance in this account is recognized as part of accumulated other comprehensive income in the balance sheet.
Exercise 17-13
|( )s indicate |PBO |Plan Assets | Income Asset or |
|credits; debits | | |AOCI Statement Asset Liability |
|otherwise | | |______________ ________ _______________ |
| | | | |
|($ in 000s) | | | |
| | | |Prior Service Cost |
| | | |Prior Service Cost |
| | | |Prior Service Cost |
| | | |Prior Service Cost |
| | |Prior Service Cost |Net Loss |Pension Expense |Cash |Net Pension (Liability) / Asset | |Bal., Jan. 1, 2010 |(350) |240 |28 |42 | | |(110) | | | | | | | | | | | Service cost |(38) | | | |38 | |(38) | | Interest cost, 8% |(28) | | | |28 | |(28) | | Expected return on assets | |24 | | |(24) | |24 | | Gain on assets | |12 | |(12) | | |12 | | Amortization of: | | | | | | | | | Prior service cost–AOCI | | |(4) | |4 | | | | Net loss–AOCI | | | |(0.7) |0.7 | | | | Loss on PBO |(5) | | |5 | | |(5) | | Cash contributions | |30 | | | |(30) |30 | | Retiree benefits |16 |(16) | | | | | | | | | | | | | | | |Bal., Dec. 31, 2010 |(405) |290 |24 |34.3 |46.7 | |(115) | |Problem 17-16
Requirement 1
Retirement
Attribution Period Period
26 years 5 years
age age age age
34 60 62 67
1986 2012 2014 2019
(end) (end) (end) (end)
___________________________________________________________________
retirement
( (
date “full-eligibility”
hired date
Requirement 2
Year Expected PV of $1 Present Value
End Net Cost n=1-5, i=6% at Dec. 31, 2014
2015 $4,000 x .94340 $ 3,774
2016 4,400 x .89000 3,916
2017 2,300 x .83962 1,931
2018 2,500 x .79209 1,980
2019 2,800 x .74726 2,092
$13,693
Requirement 3
$13,693 x .74726* = $10,232
*present value of $1: n=5, i=6% (from Table 2)
Problem 17-16 (concluded)
Requirement 4
$10,232 x 23 yrs*/26 yrs** = $9,051
* 1986-2009
** attribution period (1986-2012)
Requirement 5
$13,693 x .79209* = $10,846 (EPBO)
* present value of $1: n=4, i=6% (from Table 2)
$10,846 x 24 yrs*/26 yrs** = $10,012
* 1986-2010
** attribution period (1986-2012)
Requirement 6
$13,693 x .79209* = $10,846 (EPBO)
* present value of $1: n=4, i=6% (from Table 2)
$10,846 x 1 yr/26 yrs = $417
Requirement 7
$9,051 (beginning APBO) x 6% = $543
Requirement 8
APBO at the beginning of 2010 (from req. 4) $9,051
Service cost: (from req. 5) 417
Interest cost: (from req. 6) 543
APBO at the end of 2010 (agrees with req. 5*) $10,011
* $1 difference due to rounding
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