Exercise 17–21
Requirement 1
($ in millions)
Service cost $ 60
Interest cost 27
* Since the amendment was at the end of the year, there is no amortization of prior
service cost in 2018.
Requirement 2
($ in millions)
Pension expense (calculated above) 63
Plan assets (expected return on assets) 24
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17–! Intermediate
Accounting 9e
Companies report the service cost component of pension expense $60M)
in the income statement as part of the total compensation costs arising from
services rendered by the employees during the period, separate from the other
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17–! Intermediate
Accounting 9e
Exercise 17–22
Under U.S. GAAP, prior service cost is included among other comprehensive
Under IAS No. 19, past service cost (called prior service cost under U.S.
GAAP) is expensed immediately as part of the service cost for the year.
Requirement 1
Income statement: ($ in millions)
Service cost—2018 $ 60
Other comprehensive income:
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17–! Intermediate
Accounting 9e
Exercise 17–22 (concluded)
Requirement 2
($ in
millions)
Service cost 72
DBO (2018 service cost)
When Lacy adds its annual cash investment to its plan assets,
the value of those plan assets increases by $60 million:
To Record Funding
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17–! Intermediate
Accounting 9e
To Record Payment of Benefits
© The McGraw-Hill Companies, Inc., 2018
17–! Intermediate
Accounting 9e
Exercise 17–23
B 1. Change in actuarial assumptions for a defined benefit pension plan.
C 2. Determination that the accumulated benefits obligation under a
© The McGraw-Hill Companies, Inc., 2018
17–! Intermediate
Accounting 9e
Exercise 17–24
Requirement 1 $72,000
EPBO
2018
Requirement 2
EPBO fraction APBO
2018 earned 2018
Requirement 3
EPBO to accrue EPBO
2018 interest 2019
Requirement 4
EPBO fraction APBO
2019 earned 2019
© The McGraw-Hill Companies, Inc., 2018
17–! Intermediate
Accounting 9e
Exercise 17–25
Requirement 1
EPBO fraction APBO
earned
Requirement 2
Requirement 3
EPBO attributed service
2018 to 2018 cost
Requirement 4
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17–! Intermediate
Accounting 9e
Exercise 17–26
Requirement 1 22 years
Requirement 3
EPBO fraction APBO
earned
EPBO fraction APBO
earned
10 years before 2018: beginning of 2009 (or end of 2008)
Requirement 4
EPBO interest EPBO
beg. multiple end
EPBO interest EPBO
beg. multiple end
or, alternatively:
EPBO fraction APBO
earned
EPBO fraction APBO
earned
© The McGraw-Hill Companies, Inc., 2018
17–! Intermediate
Accounting 9e
Exercise 17–27
Requirement 1
($ in 000s)
Service cost $124
Interest cost (7% x $700) 49
Requirement 2
($ in 000s)
Postretirement benefit expense (calculated above)…………………… 167
Plan assets (expected return on assets)……………………………………… 5
Amortization of net gain—OCI (current amortization)* ……………. 1
© The McGraw-Hill Companies, Inc., 2018
17–! Intermediate
Accounting 9e
The amortization amount is reported as other comprehensive income on
the statement of comprehensive income. Companies report the service cost
component of postretirement benefit expense $124,000) in the income
* We amortize a Net gain–AOCI (credit balance) with a debit.
© The McGraw-Hill Companies, Inc., 2018
17–! Intermediate
Accounting 9e
Exercise 17–28
Requirement 1
($ in 000s)
Net loss (previous losses exceeded previous gains) $336
Requirement 2
($ in 000s)
Postretirement benefit expense
Requirement 3
($ in 000s)
Net loss, beginning of 2018 $336
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17–! Intermediate
Accounting 9e