Chapter 20: Question 29Q (page 1161)
What is the difference between the APBO and the EPBO? What are the components of post-retirement expense?
APBO and EPBOare two termsrelated to an organization's pension plan.Both terms determine thepresent value of the total pension expenseusing thetime value of money.
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Why didn’t the FASB cover both types of post-retirement benefits—pensions and healthcare—in the earlier pension accounting rules?
For Warren Corporation, year-end plan assets were \(2,000,000. At the beginning of the year, plan assets were \)1,780,000. During the year, contributions to the pension fund were \(120,000, and benefits paid were \)200,000. Compute Warren’s actual return on plan assets.
Explain the difference between service cost and prior service cost.
Hanson Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances related to this plan. Plan assets (market-related value) \(520,000 Projected benefi t obligation 700,000 Pension asset/liability 180,000 Cr. Prior service cost 81,000 Net gain or loss (debit) 91,000 As a result of the operation of the plan during 2017, the actuary provided the following additional data for 2017. Service cost \)108,000 Settlement rate, 9%; expected return rate, 10% Actual return on plan assets 48,000 Amortization of prior service cost 25,000 Contributions 133,000 Benefits paid retirees 85,000 Average remaining service life of active employees 10 years
Instructions Using the preceding data, compute pension expense for Hanson Corp. for the year 2017 by preparing a pension worksheet that shows the journal entry for pension expense. Use the market-related asset value to compute the expected return and for corridor amortization.
Question: What is net interest? Identify the elements of net interest and explain how they are computed.
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