| Posted: 12 Apr 2010 at 18:27 | IP Logged
|
|
|
Parker Co. amended its pension plan on January 2 of the current year. It also granted $600,000 of unrecognized prior service costs to its employees. The employees are all active and expect to provide 2,000 service years in the future, with 350 service years this year. What is Parker's unrecognized prior service cost amortization for the year?
a. 0
b. $2,000
c. $105,000
d. $600,000
I thought unrecognized prior service cost was amortized by dividing the unrecognized prior service cost by the average remaining service of life. I don't really understand why the answer has us divide the service years this year by the service years in the future and then multiply that by the unrecognized prior year service cost.
Choice "c" is correct. Unrecognized prior service cost is amortized by assigning an equal amount to each future period of service of each employee who is active at the date of the amendment. In this problem, prior service cost will be assigned equally to each service year provided by the company's employees as follows:
$600,000 x (350/2000) = $105,000
__________________
FAR: 4/26 passed 83
AUD: 5/26 passed 76
BEC: 7/9 passed 81
REG: 8/31 passed 81
|
Active Topics 
Memberlist 
Search 
Help
Register 
Login
Topic: Unrecognized Prior Service Cost Question
Topic Closed)
