Homework Solutions - Ch 17

# Homework Solutions - Ch 17 - Exercise 17-6(\$ in millions...

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Exercise 17-6 (\$ in millions) PBO: Beginning of 2006 \$360 Service cost ? Interest cost 36 x (10% x \$360) Loss (gain) on PBO 0 Less: Retiree benefits (54) End of 2006 \$465 Service cost = \$465 - 360 - 36 + 54 = \$123 million Exercise 17-7 (\$ in millions) Plan assets Beginning of 2006 \$700 Actual return 77 x (11% x \$700) Cash contributions ? Less: Retiree benefits (66) End of 2006 \$750 Cash contributions = \$750 - 700 - 77 + 66 = \$39 million

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Exercise 17-9 Requirement 1 (\$ in millions) Service cost \$20 Interest cost 12 Actual return on the plan assets, \$9 million adjusted for \$1 million gain on the plan assets (8) Pension expense \$24 Requirement 2 Pension expense (calculated above) 24 Prepaid (accrued) pension cost (difference) 4 Cash (given) 20

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Exercise 17-11 Requirement 1 1.2% x service years x final year’s salary = 1.2% x 20 x \$270,000 = \$64,800 Requirement 2 The present value of the retirement annuity at the end of 2031 is \$64,800 x 9.10791* = \$590,193 * present value of an ordinary annuity of \$1: n=15, i=7%
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Homework Solutions - Ch 17 - Exercise 17-6(\$ in millions...

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