978-1259722660 Chapter 17 Solution Manual Part 7

Exercise 17–29

Requirement 1

($ in millions)

Service cost $34

Requirement 2

($ in millions)

The amortization amount is reported as other comprehensive income in the

statement of comprehensive income. Companies report the service cost

component of postretirement benefit expense ($34M) in the income statement as

* Because Prior service cost—AOCI has a debit balance, we amortize it with a credit. After the

amortization amount is reported as OCI in this year’s statement of comprehensive income, the respective

AOCI amount in the balance sheet is reduced.

17–! Intermediate

Accounting 9e

Exercise 17–30

Requirement 1

The “negative” prior service cost is first offset against any existing

prior service cost before it is amortized.

($ in 000s)

Prior service cost $ 50

Requirement 2

Service cost $114

17–! Intermediate

Accounting 9e

Exercise 17–31

Requirement 1

($ in 000s)

Number of Fraction of Prior

Year Employees Total Service Service Amount

Still Employed Years Cost Amortized

2019 100 100/550 x $110 = $ 20

2020 90 90/550 x 110 = 18

______ __________ _____

Total Number Total Amount

of Service Years Amortized

Requirement 2

* The average service life is the total estimated service years divided by

the total number of employees in the group:

total number total number average

of service years of employees service years

17–! Intermediate

Accounting 9e

Exercise 17–32

Requirement 1

The specific citation that describes the guidelines is found in FASB ASC

a. What is the objective for attributing expected postretirement benefit obli-

b. When does the attribution period for expected postretirement benefits be-

c. When does the attribution period for expected postretirement benefits end

Requirement 2

Specifically, the guidelines are:

Attribution

35-61 In the context of this Subtopic, attribution is the process of assigning the

35-66 The beginning of the attribution period generally is the date of hire.

However, if the plan’s benefit formula grants credit only for service from a

35-68 In all cases, the end of the attribution period shall be the full eligibility

date. For postretirement benefit plans that are pay-related or that

17–! Intermediate

Accounting 9e

The FASB Accounting Standards Codification represents the

single source of authoritative U.S. generally accepted accounting principles. The

specific citation for each of the following items is:

1. The disclosure required in the notes to the financial statements for plan

assets:

2. Recognition of the net pension asset or net pension liability:

3. Disclosures required in the notes to the financial statements for pension

cost for a defined contribution plan:

Problem 17–1

Requirement 1

measurement date



2004 2018 2038 2056

(beg.) (end) (end) (end)

___________________________________________________

Service period

17–! Intermediate

Accounting 9e

Exercise 17–33

PROBLEMS

Requirement 2

Requirement 3

The present value of the retirement annuity as of the retirement date

(end of 2038) is:

* Present value of an ordinary annuity of $1: n = 18, i = 7% (from Table 4)

The ABO is the present value of the retirement benefits at the end of

2018:

* Present value of $1: n = 20, i = 7% (from Table 2)

Requirement 4

1.6% x 18 x $100,000 = $28,800

17–! Intermediate

Accounting 9e

Problem 17–2

Requirement 1

measurement date



2004 2018 2038 2056

(beg.) (end) (end) (end)

___________________________________________________

Service period

Requirement 2

Requirement 3

The present value of the retirement annuity as of the retirement date (end

of 2036) is:

[This is the lump-sum equivalent of the retirement

annuity as of the retirement date.]

* Present value of an ordinary annuity of $1: n = 18, i = 7% (from Table 4)

The PBO is the present value of the retirement benefits at the end of

2018:

* Present value of $1: n = 20, i = 7% (from Table 2)

Requirement 4

1.6% x 18 x $240,000 = $69,120

17–! Intermediate

Accounting 9e

* Present value of an ordinary annuity of $1: n = 18, i = 7% (from Table 4)

** Present value of $1: n = 17, i = 7% (from Table 2)

17–! Intermediate

Accounting 9e

Problem 17–3

Requirement 1

1.6% x 14 x $240,000 = $53,760

* Present value of an ordinary annuity of $1: n = 18, i = 7% (from Table 4)

** Present value of $1: n = 21, i = 7% (from Table 2)

Requirement 2

Requirement 3

* Present value of an ordinary annuity of $1: n = 18, i = 7% (from Table 4)

** Present value of $1: n = 20, i = 7% (from Table 2)

Requirement 4

Requirement 5

PBO at the beginning of 2018 (end of 2017) $130,603

Note: In requirement 3 of the previous problem this same amount is calculated

without separately determining the service cost and interest elements (allowing

for a $3 rounding adjustment).

17–! Intermediate

Accounting 9e

Problem 17–4

Requirement 1

PBO Without Amendment PBO With Amendment

1.6% x 15 yrs. x $240,000 = $57,600 1.75% x 15 yrs. x $240,000 = $63,000

Prior service cost

* Present value of an ordinary annuity of $1: n = 18, i = 7% (from Table 4)

** Present value of $1: n = 20, i = 7% (from Table 2)

Alternative calculation: 1.75 – 1.6 = 0.15% x 15 yrs x $240,000 = $5,400

Requirement 2

Requirement 3

1.75% x 1 x $240,000 = $4,200

* Present value of an ordinary annuity of $1: n = 18, i = 7% (from Table 4)

** Present value of $1: n = 19, i = 7% (from Table 2)

Requirement 4

Requirement 5

Service cost (from req. 3) $11,682

17–! Intermediate

Accounting 9e

17–! Intermediate

Accounting 9e

Problem 17–5

PBO With Previous Rate PBO With Revised Rate

1.6% x 15 yrs x $240,000 = $57,600 1.6% x 15 yrs x $240,000 =

$57,600

Gain on PBO

1 Present value of an ordinary annuity of $1: n = 18, i = 7% (from Table 4)

2 Present value of $1: n = 20, i = 7% (from Table 2)

3 Present value of an ordinary annuity of $1: n = 18, i = 8% (from Table 4)

4 Present value of $1: n = 20, i = 8% (from Table 2)

17–! Intermediate

Accounting 9e