ACCT 302 Connect Homework 17 Pensions and other Post Retirement Benefits Assignment solutions answer

ACCT 302 Connect Homework 17 Pensions and other Post Retirement Benefits Assignment solutions complete answers 

 

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The projected benefit obligation was $240 million at the beginning of the year. Service cost for the year was $14 million. At the end of the year, pension benefits paid by the trustee were $10 million and there were no pension-related other comprehensive income accounts. The actuary’s discount rate was 5%.
 
What was the amount of the projected benefit obligation at year-end?

 

Pension plan assets were $120 million at the beginning of the year. The return on plan assets was 5%. At the end of the year, retiree benefits paid by the trustee were $4 million and cash invested in the pension fund was $8 million.
 
What was the amount of the pension plan assets at year-end?

 

The pension plan was amended last year, creating a prior service cost of $110 million. Service cost and interest cost for the year were $32 million and $15 million, respectively. At the end of the year, there was a negligible balance in the net gain–pensions account. The actual return on plan assets was $15 million although it was expected to be $18 million. On average, employees’ remaining service life with the company is 10 years.
 
What was the total pension cost for the year? (Amounts to be deducted should be indicated with a minus sign.)

 

On January 1, 2021, Medical Transport Company’s accumulated postretirement benefit obligation was $100 million. At the end of 2021, retiree benefits paid were $11 million. Service cost for 2021 is $8 million. Assumptions regarding the trend of future health care costs were revised at the end of 2021, causing the actuary to revise downward the estimate of the APBO by $5 million. The actuary’s discount rate is 8%.
 
Determine the amount of the accumulated postretirement benefit obligation at December 31, 2021.

 

Indicate by letter whether each of the events listed below increases (I), decreases (D), or has no effect (N) on an employer’s projected benefit obligation.

 

Actuary and trustee reports indicate the following changes in the PBO and plan assets of Douglas-Roberts Industries during 2021:
 

 
 
Prior service cost at Jan. 1, 2021, from plan amendment at the
beginning of 2018 (amortization: $4 million per year)
$
28
million
Net loss—AOCI at Jan.1, 2021 (previous losses exceeded previous gains)
$
140
million
Average remaining service life of the active employee group
 
10
years
Actuary's discount rate
 
7
%
 
 

($ in millions)
 
 
 
 
Plan
 
PBO
Assets
 
Beginning of 2021
$
800
 
 
Beginning of 2021
 
$
600
 
 
Service cost
 
50
 
 
Return on plan assets,
 
 
 
 
 
 
 
 
 
 
8% (10% expected)
 
 
48
 
 
Interest cost, 7%
 
56
 
 
 
 
 
 
 
 
Loss (gain) on PBO
 
(9
)
 
Cash contributions
 
 
96
 
 
Less: Retiree benefits
 
(30
)
 
Less: Retiree benefits
 
 
(30
)
 
End of 2021
$
867
 
 
End of 2021
 
$
714
 
 
 
  
Required:
1-a. Determine Douglas-Roberts's pension expense for 2021.
1-b, 2. to 4. Prepare the appropriate journal entries to record the pension expense, to record any 2021 gains and losses, to record the cash contribution to plan assets and to record retiree benefits.

 

Lacy Construction has a noncontributory, defined benefit pension plan. At December 31, 2021, Lacy received the following information:
 

Projected Benefit Obligation
($ in millions)
Balance, January 1
 
$
1,320
 
 
Service cost
 
 
100
 
 
Prior service cost
 
 
52
 
 
Interest cost(5.0%)
 
 
66
 
 
Benefits paid
 
 
(99
)
 
Balance, December 31
 
$
1,439
 
 
 
 

Plan Assets
($ in millions)
Balance, January 1
 
$
630
 
 
Actual return on plan assets
 
 
65
 
 
Contributions 2021
 
 
100
 
 
Benefits paid
 
 
(99
)
 
Balance, December 31
 
$
696
 
 
 
 
The expected long-term rate of return on plan assets was 10%. There were no AOCI balances related to pensions on January 1, 2021. At the end of 2021, Lacy amended the pension formula creating a prior service cost of $52 million.
 
Required:
1. Determine Lacy's pension expense for 2021.
2. Prepare the journal entry(s) to record Lacy’s (a) pension expense, (b) gains or losses, (c) prior service cost, (d) funding, and (e) payment of retiree benefits for 2021.

 

Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.2% × 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 $80,000 at the end of 2021 and the company's actuary projects her salary to be $230,000 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:

1. What is the company's projected benefit obligation at the beginning of 2021 (after 14 years' service) with respect to Davenport? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)
2. Estimate by the projected benefits approach the portion of Davenport's annual retirement payments attributable to 2021 service.
3. What is the company's service cost for 2021 with respect to Davenport? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)
4. What is the company's interest cost for 2021 with respect to Davenport? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)
5. Combine your answers to requirements 1, 3, and 4 to determine the company's projected benefit obligation at the end of 2021 (after 15 years' service) with respect to Davenport. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)

 

Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.3% × 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 $91,000 at the end of 2021 and the company's actuary projects her salary to be $285,000 at retirement. The actuary's discount rate is 9%. (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.)
 
At the beginning of 2022, the pension formula was amended to:
 
1.40% × Service years × Final year's salary
 
The amendment was made retroactive to apply the increased benefits to prior service years.
 
Required:

1. What is the company's prior service cost at the beginning of 2022 with respect to Davenport after the amendment described above?
2. Since the amendment occurred at the beginning of 2022, amortization of the prior service cost begins in 2022. What is the prior service cost amortization that would be included in pension expense?
3. What is the service cost for 2022 with respect to Davenport?
4. What is the interest cost for 2022 with respect to Davenport?
5. Calculate pension expense for 2022 with respect to Davenport, assuming plan assets attributable to her of $110,000 and a rate of return (actual and expected) of 10%.
 
(For all requirements, do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

 

Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.2% × 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 $80,000 at the end of 2021 and the company's actuary projects her salary to be $230,000 at retirement. The actuary's discount rate is 6%.
 
At the beginning of 2022, changing economic conditions caused the actuary to reassess the applicable discount rate. It was decided that 7% is the appropriate rate. (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:
Calculate the effect of the change in the assumed discount rate on the PBO at the beginning of 2022 with respect to Davenport. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)