Worksheet 2 Pensions The following information pertains to Waco Corp s defined benefit pension plan Discount rate 7% Expected rate of return 9% Average service life 10 years

Worksheet 2 – Pensions

The following information pertains to Waco Corp’s defined benefit pension plan

Discount rate 7%

Expected rate of return 9%

Average service life 10 years

At January 1, At December 31,

2011 2011

Projected benefit obligation $800,000 $1,220,000

Fair value of pension plan assets 960,000 1,080,000

Unrecognized prior service cost 280,000

Unamortized prior pension gain 108,000

Service cost for the current year was $90,000. There were no contributions made or benefits paid during the year. Waco’s unfunded accrued pension liability was $8,000 at January 1, 2011. Waco uses the straight-line method of amortization over the maximum period permitted.

1. Calculate the amounts to be recognized as components of Waco’s pension expense at December 31, 2011. Round all amounts to the nearest dollar. (Be sure to show all calculations in order to receive full credit)

a. Interest cost

b. Expected return on plan assets

c. Actual return on plan assets

d. Amortization of prior service cost

e. Minimum amortization of pension gain included in accumulated other comprehensive income.

2. Determine whether the following components increase or decrease Waco’s pension liability.

a. Service cost

b. Deferral of gain on pension plan assets

c. Actual return on plan assets

d. Amortization of prior service cost

e. Amortization of pension gain included in accumulated other comprehensive income.

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Worksheet 2 – Pensions
The following information pertains to Waco Corp’s defined benefit pension plan
Discount rate
7%
Expected rate of return
9%
Average service life
10 years
At January 1,
At December 31,
2011
2011
Projected benefit obligation
$800,000
$1,220,000
Fair value of pension plan assets
960,000
1,080,000
Unrecognized prior service cost
280,000
Unamortized prior pension gain
108,000
Service cost for the current year was $90,000. There were no contributions made or
benefits paid during the year. Waco’s unfunded accrued pension liability was $8,000 at
January 1, 2011.
Waco uses the straight-line method of amortization over the maximum
period permitted.
1.
Calculate the amounts to be recognized as components of Waco’s pension expense
at December 31, 2011. Round all amounts to the nearest dollar. (Be sure to show all
calculations in order to receive full credit)
a.
Interest cost
b.
Expected return on plan assets
c.
Actual return on plan assets
d.
Amortization of prior service cost
e.
Minimum amortization of pension gain included in accumulated other
comprehensive income.
2.
Determine whether the following components increase or decrease Waco’s
pension liability.
a.
Service cost
b.
Deferral of gain on pension plan assets
c.
Actual return on plan assets
d.
Amortization of prior service cost
e.
Amortization of pension gain included in accumulated other comprehensive
income.

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