Joined: 17 Jan 2009
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Posted: 28 Mar 2009 at 14:39 | IP Logged
This is from Becker's hw question 6 of pensions.
Dec 31, 20X6 PBO $1,500,000 FV of plan assets $1,400,000 Unrecognized prior service cost $200,000 Unrecognized net transition asset $60,000
Dec 31, 20X7: PBO $1,740,000 FV of assets: $1,800,000 Service Cost: $220,000
Assumptions: Discount rate 6% Expected return 8%
Company makes an annual pension plan contribution of $200,000. The company's employees had an average remaining service life of 20 years on 12/31/X6 and the company expects to pay benefits totaling $170,000 to retired employees in 20X8. The company has an effective tax rate of 30%. What would the company report as net periodic pension cost on its Dec 31, 20X7 income statement?
a) $187,400 b) $193,400 c) $205,000 d) $211,000
The correct answer is c. I am just confused as to why there is no gain/loss amortization to be calculated in the "SIR-AGE" calculation. Thanks for the help
Joined: 30 Jan 2009 Location: India
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Posted: 28 Mar 2009 at 14:46 | IP Logged
Gain/loss amortization is only for any unrecognized gain/loss at the beginning of the year...
In this question, there is no unrecognized gain/loss at the beginning of the year. This year's gain/loss would be fully unrecognized in OCI and then amortized beginning next year....
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Topic: help with a pension question
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