Concept explainers
(1)
Pension expense: Pension expense is an expense to the employer paid as compensation after the completion of services performed by the employees.
Pension expense includes the following components:
- Service cost
- Interest cost
- Expected return on plan assets
- Amortization of prior service cost
- Amortization of net loss or net gain
International Financial Reporting Standards (IFRS): IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports.
Generally Accepted Accounting Principles (GAAP): These are the guidelines necessary to create accounting principles approved Financial Accounting Standards Board (FASB) for the implementation of financial information reporting in the Country U.
To explain: Whether the change in discount rate from 7% to 6% would cause a loss under GAAP
(2)
To journalize: Loss on PBO, under GAAP
(3)
To journalize: Loss on PBO, under IFRS
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INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
- Problem 17-2 (Algo) PBO calculations; present value concepts [LO17-3] Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.4% × service years × final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2007 and is expected to retire at the end of 2041 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $92,000 at the end of 2021 and the company's actuary projects her salary to be $290,000 at retirement. The actuary's discount rate is 6%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:2. Estimate by the projected benefits approach the amount of Davenport's annual retirement payments earned as of the end of 2021.3. What is the company's projected benefit obligation at the end of 2021 with respect to Davenport? (Do not round intermediate calculations. Round your final answer…arrow_forwardYou are a pension fund manager who has obligations over the years to come of: t: 1 2 3 5 CF: 6.5 7 2.5 13.5 The applicable rate is: 0.095 What is the modified duration of this pension obligation? O3.0977 3.3360 3.2050 2.9786 3.4361 13arrow_forwardExercise 17-2 (Algo) Determine the projected benefit obligation [LO17-3] On January 1, 2024, Ravetch Corporation's projected benefit obligation was $46 million. During 2024, pension benefits paid by the trustee were $6 million. Service cost for 2024 is $10 million. Pension plan assets (at fair value) increased during 2024 by $8 million as expected. At the end of 2024, there were no pension-related other comprehensive income (OCI) accounts. The actuary's discount rate was 10%. Required: Determine the amount of the projected benefit obligation at December 31, 2024. Note: Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50). Amounts to be deducted should be indicated with a minus sign. Projected Benefit Obligation Beginning of 2024 Service cost Interest cost End of 2024 $ 0.00arrow_forward
- Question 10-pensione Selected Information about the pension plan of Orange Co. is as follows: 31/12/2019 31/12/2020 Defined benefit obligation Fair value of plan assets 5,100,000 4,850,000 4,800,500 4,800,000 Pension expense 1,500,010 1,780,000 Contribution 1,000,000 1,500,000 Discount rate (for year) 7% 6% Required (a) → Calculate the Pension Asset/ Liability at December 31, 2020. (b) - Prepare the entry for 2020 to record the pension expense and contribution.arrow_forwardQuestion 20 ## Bonita Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, 2020 December 31, 2020 Vested benefit obligation $1,520 $1,930 Accumulated benefit obligation 1,930 2,700 Projected benefit obligation 2,510 3,360 Plan assets (fair value) 1,730 2,670 Settlement rate and expected rate of return 10% Pension asset/liability 780 ? Service cost for the year 2020 400 Contributions (funding in 2020) 690 Benefits paid in 2020 200 (a3) Indicate the pension amounts reported in the balance sheet. Bonita Company’sBalance Sheet (Partial) $…arrow_forwardQuestion 20### Bonita Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, 2020 December 31, 2020 Vested benefit obligation $1,520 $1,930 Accumulated benefit obligation 1,930 2,700 Projected benefit obligation 2,510 3,360 Plan assets (fair value) 1,730 2,670 Settlement rate and expected rate of return 10% Pension asset/liability 780 ? Service cost for the year 2020 400 Contributions (funding in 2020) 690 Benefits paid in 2020 200 (a3) New attempt is in progress. Some of the new entries may impact the last attempt grading. Your answer is partially correct. Indicate the pension amounts reported in the balance sheet. Bonita Company’sBalance Sheet (Partial)…arrow_forward
- Question 11 The following data are for the pension plan for the employees of Cullumber Company. 1/1/20 12/31/20 12/31/21 Accumulated benefit obligation $ 5400000 $ 5410000 $ 6850000 Projected benefit obligation 5560000 5770000 7530000 Plan assets (at fair value) 4600000 6230000 6780000 AOCL – net loss 0 975000 1000000 Settlement rate (for year) 9% 10% Expected rate of return (for year) 9% 8% Cullumber’s contribution was $861000 in 2021 and benefits paid were $751000. Cullumber estimates that the average remaining service life is 15 years.The actual return on plan assets in 2021 was $550000. $360000. $440000. $430000.arrow_forwardPROBLEM NO. 1 Mermade Corp. adopts the IFRS for its defined benefit retirement plan on January 1, 2021, with the following beginning balances: Fair Value of Plan Assets are Php 200,000.00 Defined Benefit Obligation is Php is 250,000.00 The following are other information relating to the years 2021, 2022, and 2023: 2023 2022 2021 P26,000.00 P 19,000.00 P 16,000.00 10% 10% 10% 20,000.00 24,000.00 22,000.00 48,000.00 40,000.00 16,000.00 21,000.00 16,400.00 14,000.00 Current service cost Discount rate Actual return on plan assets Contributions to the plan Benefits paid to retiree Other information: 1. The plan was amended on January 1, 2022 which resulted to a Past Service Cost of Php 160,000.00 2. On December 31, 2023, there were changes in the actuarial assumptions that establishes a defined benefit obligation as of December 31, 2023 in the amount of Php 520,000.00. Required: For each year (2021, 2022, and 2023), prepare a worksheet presenting the balances and the activities of the…arrow_forwardQuestion 8 of 20 View Policies Current Attempt in Progress On January 1, 2022, Wildhorse Co. has the following balances: Projected benefit obligation Fair value of plan assets The settlement rate is 10%. Other data related to the pension plan for 2022 are: Amortization of unrecognized prior service costs Benefits paid Actual return on plan assets Amortization of unrecognized net gain O $3091400. O $3109000. O $3521800. O $3131100. $2760000 2363000 $236300 77900 390700 141200 305000 The balance of the projected benefit obligation at December 31, 2022 is 27900arrow_forward
- Question 19 of 20 View Policies The settlement rate is 9%. Other data related to the pension plan for 2026 are: Benefits paid Actual return on plan assets Amortization of net gain $2850000 O $2777000. O $2850000. O $3180000. O $2955000. 2350000 Amortization of prior service costs due to increase in benefits Contributions The fair value of plan assets at December 31, 2026 is $235000 74000 435000 160000 330000 17000arrow_forwardQUESTION 3 Bacon Bad is a national diner that has set up a defined benefit pension plan for its employees. The company uses IFRS and has provided you with the following information pertaining to its pension plan: Pension obligation, December 31,2021 - $6854203 Plan assets, December 31, 2021 - $5906519 Interest rate on pension obligations - 3% Current service cost for the year (accrued at the end of the year) - $598059 Improvement in pension plan, effective on January 1, 2022 - $62000 Actuarial gain on change in assumptions - $0 Expected retum on plan assets -3% of plan assets Actual return on plan assets - $271186 Amounts remitted by employer to pension trust on January 1,2022 - $668416 Payments we do not need payment to retireearrow_forwardQuestion 19 Tyson, Inc sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2021. Service cost $345.000 330,000 270.000 Plan contributions Actual return on plan assets Projected benefit obligation January 1 Fair value of plan assets, January 1 3,600,000 2,400,000 The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2021 is: OA$705,000 OR$465,000 Oc$435.000 OD$345.000arrow_forward
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