2-15-11 Solutions

2-15-11 Solutions - *2 Q20-18 Corridor amortization occurs...

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*2 Q20-18 Corridor amortization occurs when the accumulated OCI (G/L) balance gets too large. The gain or loss is too large when it exceeds the arbitrarily selected FASB criterion of 10% of the larger of the beginning balances of the projected benefit obligation or the market-related value of the plan assets. The excess gain or loss balance may be amortized using any systematic method but the amortization cannot be less than the amount computed using the straight-line method over the average remaining service-life of active employees expected to receive benefits. Q20-33 EPBO (expected postretirement benefit obligation) is the actuary’s present value of all benefits expected to be paid after retirement, while APBO (accumulated postretirement benefit obligation) is the actuarial present value of future benefits attributed to employees’ services rendered to a particular date. The components of postretirement expense are service cost, interest cost, expected return on plan assets, amortization of prior service cost, and gains and losses.
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EXERCISE 20-9 (a) Note to financial statements disclosing components of 2010 pension expense: Note X : Net pension expense for 2010 is composed of the following components of pension cost: Service cost. ............................................................... $ 94,000 Interest cost. ............................................................... 253,000 Expected return on plan assets. .............................. (175,680) Prior service cost amortization. ............................... 42,000 Pension expense. ............................................... $213,320 (b) Comprehensive income, 2010 Amortization of prior service cost. .......................... $ (42,000) Actuarial loss. ............................................................ 45,680 Other comprehensive loss. ....................................... $ 3,680 Comprehensive income, 2010
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This note was uploaded on 01/31/2011 for the course MGMT 351 taught by Professor Staff during the Spring '08 term at Purdue.

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2-15-11 Solutions - *2 Q20-18 Corridor amortization occurs...

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