Student Name:
Class:
PV of retirement annuity at end of 2016
Pension benefit at end of 2016
Less: Interest cost
Projected benefit obligation
Requirement 6:
PBO at the end of 2017
PBO at the end of 2016
Change in PBO
PV of retirement annuity at end of 2017
Accumulated benefit obligation
Requirement 5:
Final year’s salary
1.2%
Correct!
80,000$
Correct!
Instructor
McGraw-Hill/Irwin
Exercise 17-12
Clark Industries
Requirement 1:
Percentage
Requirement 4:
Salary at end of 2016
Requirement 3:
Service years
Lump-sum equivalent
Final year’s salary
Annual retirement benefit payments
Present value of an ordinary annuity (n=15; i=7%)
Annual retirement benefit
Requirement 2:
Projected benefit obligation
Present value (n=25; i=7%)
PV of retirement annuity at end of 2041
1.2% X Service years X Final year’s salary
Clark Industries
Annual retirement benefit formula:
January 1, 1997
Stanley Mills’ hire date
Stanley Mills’ retirement date
December 31, 2041
Salary 20 years after hiring
Projected salary at retirement
Actuary‘s discount rate
Years of service
Expected retirement span – in years
Student Name:
Class:
Balance sheet element:
Balance sheet element:
Shareholders’ Equity
Which elements of Warrick’s balance sheet are affected by the components of pension
expense? What are the specific changes in these accounts? NOTE: because of the free-form
nature of this exercise there is no reliable way to label your answers with “Correct” or “Try
Again”.
Instructor
McGraw-Hill/Irwin
Exercise 17-14
Balance sheet element:
Liabilities
Warrick Boards
pension liability (underfunded plan) will increase by $274
Amount & direction of change:
Explanation:
Balance sheet element:
Balance sheet element:
Prior service cost-AOCI
Amount & direction of change:
Balance sheet element:
Net loss-AOCI
Amount & direction of change:
Explanation:
224$
Service cost
Pension expense calculation (in millions):
Warrick Boards
Amortization of net loss
Amortization of prior service cost
Expected return on the plan assets ($100 actual, less $10 gain)
Interest cost
Student Name:
Class:
( )s indicate
Prior Net Pension
credits; debits
Plan Service Net Pension (Liability)/
otherwise
PBO Assets Cost Loss Expense Cash Asset
(800) 600 114 80 (200)
Universal Products
Pension Worksheet
Balance, January 1, 2016
Exercise 17-15
McGraw-Hill/Irwin
Instructor
($ in 000s)
Prior service cost
Prior Net Pension
Plan Service Net Pension (Liability)/
PBO Assets Cost Loss Expense Cash Asset
(800) 600 114 80 (200)
84
Partially Completed Pension Worksheet
Given Data E17-15:
Universal Products
Service cost
Balance, January 1, 2016
Average remaining service life of active employee group
Actuary’s discount rate
Prior service cost at end of 2014
Expected rate of return on assets
Interest cost, 5%
Prior service cost
Retiree benefits
Cash funding
Prior service cost
Gain on PBO
Net loss
Loss on assets
Expected return on assets
Student Name:
Class:
–$
150
Contributions 2016
Benefits paid
Actual return on plan assets
Balance, December 31, 2016
Contributions 2017
Benefits paid
–$
–
Interest cost
Expected return on the plan assets
Pension Expense – 2017
Expected return on the plan assets
Service cost
150$
–
Plan assets
PBO
150$
PBO
Balance, January 1, 2016
Actual return on plan assets
2. Plan Assets
3. Pension Expense – 2016
4. Net Pension Asset/Liability
Service cost
Interest cost
Balance, January 1, 2016
Service cost
1. Projected Benefit Obligation
Problem 17-6
McGraw-Hill/Irwin
Instructor
($ in 000s)
Calculations
STANLEY-MORGAN INDUSTRIES
Balance, December 31, 2016
Service cost
Interest cost
Benefits paid
Interest cost
Benefits paid
10% rate of return
STANLEY-MORGAN INDUSTRIES
Year-end funding, 2017
Year-end funding, 2016
Service cost, 2017
Service cost, 2016
Recommended discount rate
Student Name:
Class:
2016 2017
520.0$ 570.0$
Payments
Balance, 12-31-2016
Interest 10%
Service cost
Payments
Prior service cost
Balance, 1-2-2016
Interest 10%
Service cost
1,800$
Payments
Payments
Balance, 12-31-2016
1,600$
Excess at the beginning of the year
Average remaining service period in years
Net gain-AOCI at 1-1-2016
Loss in 2016
Amortization in 2016
Net gain-AOCI at 1-1-2017
10% of $1,800
2017
10% of $2,540
No excess at the beginning of the year
Amount amortized to 2017 pension expense
230$
Service cost
Net gain-AOCI at 1-1-2016
Balance, 1-1-2016
Requirement 1:
*PBO
**Plan Assets
***Net Gain-AOCI
2016
Balance, 1-1-2016
McGraw-Hill/Irwin
Instructor
($ in millions)
Pension Expenses
KOLLAR COMPANY
Problem 17-12
Interest on PBO*
Expected return**
Amortization of prior service costs
Amortization of net gain***
Requirement 2:
Debit Credit
583
Debit Credit
Loss-OCI
Plan assets
Prior service cost-OCI
PBO
2017
12
Debit Credit
Cash
Plant Assets
2017
2016
Cash
Plan assets
540
2017
($ in millions)
General Journal
KOLLAR COMPANY
Requirement 4:
Account
Requirement 3:
Loss-OCI
2016
2016
Plan assets
Account
Account
2016
Pension expense
($ in millions)
General Journal
KOLLAR COMPANY
($ in millions)
General Journal
KOLLAR COMPANY
Prior service cost-AOCI
Pension expense
Plan assets
PBO
2017
Plan assets
Amortization of net gain-OCI
PBO
Prior service cost-AOCI
450
PBO
1,800$
400$
($ in millions)
KOLLAR COMPANY
Projected benefit obligation, 12/31/2014
Prior service cost, 1/2/2016
2017 actual return on plan assets
Years gains and losses amortized
Plan asset balance at fair value, 1/1/2016
2016 contribution
2017 contribution
Expected long-term rate of return on assets
2016 actual return on plan assets
Net gain-AOCI on 1/1/2016
Service cost, 2016
Service cost, 2017
Discount rate
Payments to retirees, 2016
Payments to retirees, 2017
Student Name:
Class:
2,400$
Plus: loss
prior service cost-AOCI
Interest cost
Loss (gain) on PBO
Less: Retiree benefits
End of 2016
Service cost
Interest cost
Requirement 4: Pension expense
Actual return
Service cost
2,300$
Excess
10% of $2,400
Amount amortized
330$
Net gain, Jan. 1
Requirement 5: Average remaining service life of active employees
Problem 17-14
Requirement 1: Actual return on plan assets
Plan assets
Beginning of 2016
Requirement 3: Service cost
PBO:
McGraw-Hill/Irwin
Instructor
Beginning of 2016
HILTON PANELING, INC.
($ in 000s)
Cash contributions
Less: Retiree benefits
Expected return
Requirement 2: Loss or gain on plan assets
Actual return
Actual return
2016 2016
Beginning Ending
Balances Balances
2,300$ 2,501$
($ in 000s)
HILTON PANELING, INC.
Projected benefit obligation
Net gain-AOCI
Paid to retirees in 2016
Employer contribution in 2016
Actuary‘s discount rate
Prior service cost-AOCI
Expected rate of return on assets
Plan assets
Funded status
Student Name:
Class:
Net
Prior Pension
Plan Service Net Pension Liability/
debits otherwise
PBO Assets Cost Loss Expense Cash Asset
Net loss
Gain on PBO
(4,100) 4,530 840 477 430
(70) 70 –
Amortization of:
Prior service cost
AOCI
Problem 17-15
McGraw-Hill/Irwin
Instructor
Pension Spreadsheet
METRO RECREATION
($ in 000s)
( )s indicate credits;
Balance, January 1, 2016
Loss on assets
Interest cost, 7%
Jan. 1 Dec. 31
($ in 000s)
METRO RECREATION
Pension related data:
Projected benefit obligation
Accumulated benefits obligation
Plan assets (fair value)
Interest (discount) rate
Expected return on plan assets
Prior service cost-AOCI
Net loss-AOCI
Average remaining service life, years
Gain due to changes in actuarial assumptions
Contributions to pension fund (end of year)
Pension benefits paid (end of year)