Alpha_Beta_Corp - Pension Problem - I Alpha Beta Corp....

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Pension Problem - I Alpha Beta Corp. started a pension plan on 1 st Jan 1990 for its 5 employees, each of who had worked for a total of 8 years before the pension plan started. The company decided to give credit to the employees for prior service. The employees had an average remaining service life of 5 years with an average salary of $100,000 at the time of retirement. The average mortality estimate for the employees is 10 years after retirement. After retirement, each employee will earn an annual retirement payout based on the formula: 1.5% * Number of Years employed * Salary at Retirement The first payout will be made on the day the employee retires . The pension trust contributed $50,000 into the pension plan on 1 st Jan 1990 and expects to earn a 10% rate of return on its investments for 1990 and 1991. The actual return earned in 1990 and 1991 was $40,000 and 4% respectively. Assume a discount rate of 10%. a. What is the balance in the ADPC account at the end of the year, 1990? b. Write down all the journal entries in 1990? c. What would be the journal entry to record pension expense at the end of the year, 1990 if the company did not offer any credit for prior service? d. What is the journal entry to record pension expense in 1991? SOLUTION TO PENSION PROBLEM 1: Pension plan begins 1/1/1990 Retirement and first payout 12/31/94 12/31/2004 11 payouts Employees start working 1/1/82 Last payout
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Retirement Payout as determined on Jan 1 st 1990 = 1.5%*8*100,000*5 = $60,000
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This homework help was uploaded on 04/21/2008 for the course ACG 4133c taught by Professor Ajinka during the Spring '08 term at University of Florida.

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Alpha_Beta_Corp - Pension Problem - I Alpha Beta Corp....

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