Exercise 20-8 Kenseth Corp. has the following beginning-of-the-year present valu

Question

Exercise 20-8

Kenseth Corp. has the following beginning-of-the-year present values for its projected benefit obligation and market-related values for its pension plan assets.

Projected
Benefit
Obligation

Plan
Assets
Value

The average remaining service life per employee in 2013 and 2014 is 10 years and in 2015 and 2016 is 12 years. The net gain or loss that occurred during each year is as follows: 2013, $702,800 loss; 2014, $225,900 loss; 2015, $27,610 loss; and 2016, $62,750 gain.

Using the corridor approach, compute the amount of net gain or loss amortized and charged to pension expense in each of the four years, setting up an appropriate schedule.

Year

Minimum Amortization of Loss

Projected
Benefit
Obligation

Plan
Assets
Value

2013 $5,020,000 $4,769,000 2014 6,024,000 6,275,000 2015 7,404,500 6,526,000 2016 9,036,000 7,530,000

Explanation / Answer

Answer

working

1. (702800 - 627500 ) / 10 = 7530

2. 702800 - 7530 + 225900 = 921170

3. ( 921170 - 740450 ) / 12 = 15060

4 . 921170 - 15060 + 27610 = 933720

5. ( 933720 - 903600 ) / 12 = 2510

year project benefit obligation plan asset 10 % corridor accumulated minimum 2013 5020000 4769000 502000 0 0 2014 6024000 6275000 627500 702800 7530 2015 7404500 6526000 740450 921170 15060 2016 9036000 7530000 903600 933720 2510

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