Ellen Industries has a defined benefit pension plan. At December 31, 2017, Ellen

Question

Ellen Industries has a defined benefit pension plan. At December 31, 2017, Ellen received the following information:

At the end of 2017, Ellen contributed $60 thousand to the pension fund and benefit payments of $27 thousand were made to retirees. The expected rate of return on plan assets was 11%, and the actuary's discount rate is 10%. There were no changes in actuarial estimates and assumptions regarding the PBO.

What is Havana's 2017 actuarial gain or loss on plan assets?

a. $0.

b. $26.4 thousand gain.

c. $27 thousand loss.

d. $0.6 thousand gain.

($ in 000s) 2017 2018 Beginning Balance Beginning Balance PBO (360) (429) Plan Assets 240 300 Prior Service Cost - AOCI or OCI 200 165 Accum. Benefit Oblig.(ABO) (300) (360) Net Loss-AOCI 100.6 100

Explanation / Answer

Solution: Answer is d. $0.6 thousand gain. Working Notes: Havana's 2017 actuarial gain or loss on plan assets = Actual return on plan assets - Expected return on plan assets =$27- $26.40 =$0.60 Expected return on plan assets = Plan assets in 2017 x expected rate of return on plan assets =240 x 11% =$26.4 Actual return on plan assets let Actual return on plan assets = A Plan assets Beginning balance 2017 240 [plan assets in 2017] Add: Actual return A Add: Cash contribution 60 Less: Retire benefits ($27) Ending balance 2017 300 [plan assets in 2018] Now from above calculation we get Beginning balance 2017 + Actual return + Cash contribution - Retire benefits = Ending balance 2017 240+A+60-27=300 Actual return (A) = 300+27-60-240 Actual return (A)=27 Please feel free to ask if anything about above solution in comment section of the question.

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