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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