Three Finance Problems (2015)

Question 2
The following information pertains to A&E Co.s defined benefit pension plan for the year 2014.
Projected benefit obligation at 1/1/2014
$800,000
Fair value of pension plan assets 1/1/2014
550,000
Unrecognized prior service costs at 1/1/2014
300,000
Service cost
50,000
Amortization of prior service costs
20,000
Actual return on plan assets
40,000
Contributions to the plan
25,000
Benefits paid
15,000
Expected return on plan assets
8%
Interest/discount rate used
5%
a. Show calculations to compute the pension expense for 2014.
b. Show calculations to compute the ending balance of the projected benefit obligation at 12/31/2014.
Show calculations to compute the ending balance of the plan assets at 12/31/2014.


Question 4
Show computations for each of the following, and clearly show your final answer using the answer sheet
provided.
1.

AP Corporation has provided the following information:
Accumulated benefit obligation
Projected benefit obligation
Fair value of plan assets
Accumulated other comprehensive income- net gain

2.

1/1/15
$2,800,000
3,100,000
3,130,000
425,000

12/31/15
$3,760,000
4,000,000
3,630,000
480,000

Assuming the average service life is 15 years, show computations for the amount of accumulated net gain
that should be recognized as part of APs pension cost in 2015.
Presented below is information related to PVP, Inc. pension plan for 2014:
Accumulated benefit obligation (at year-end)
$800,000
Service cost
390,000
Funding contribution for 2014
300,000
Settlement rate used in actuarial computation
9%
Expected return on plan assets
9%
Amortization of PSC
9,000
Amortization of net gain
30,000
Actual return on plan assets
66,000
Projected benefit obligation (at beginning of period)
800,000
Market-related (and fair) value of plan assets (at beginning of period)
700,000
Show computations for (a) the amount of pension expense to be reported for 2014 and (b) amount of
unexpected gain or loss if any (state clearly if it is a gain or a loss).

3. Presented below is the information related to A&O Corporations pension plan for 2014:
Projected benefit obligation amount at the beginning of the year
9,000,000

Projected benefit obligation amount at the end of the year
Fair value of plan assets at the beginning of the year
Fair value of plan assets at the end of the year
Expected return on plan assets
Contributions made during the year
Benefits paid during the year
Show calculations to determine actual return on plan assets in 2014.

9,100,000
7,000,000
7,500,000
9%
700,000
500,000