Novak Company has five employees participating in its defined benefit pension pl
ID: 2552372 • Letter: N
Question
Novak Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2017 are as follows.
Employee
Future Years of Service
On January 1, 2017, the company amended its pension plan, increasing its projected benefit obligation by $86,400.
Compute the amount of prior service cost amortization for the years 2017 through 2022 using the years-of-service method, setting up appropriate schedules.
Year
Annual Amortization
Employee
Future Years of Service
Jim 3 Paul 4 Nancy 5 Dave 6 Kathy 6Explanation / Answer
Years Computation of Service Years Jim Paul Nancy Dave Kathy Total 2017 1 1 1 1 1 5 2018 1 1 1 1 1 5 2019 1 1 1 1 1 5 2020 1 1 1 1 4 2021 1 1 1 3 2022 1 1 2 Total 3 4 5 6 6 24 Projected beneFt obligaTon (PBO) increase by 86400 86400/24 3600 Cost per Service-Year Years Total Service Years Cost Per Service Years Annual Amortization 2017 5 3600 18000 2018 5 3600 18000 2019 5 3600 18000 2020 4 3600 14400 2021 3 3600 10800 2022 2 3600 7200 Total 86400
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