Week 2 Ch.17 Exercises

Exercise 17

E 17–5 Determine pension plan assets

The following data relate to Voltaire Company’s defined benefit pension plan:

  | ($ in millions) |

  Plan assets |   |

  Beginning of the year | $ | 600 |   |

    Actual return |   | 48 |   |

    Cash contributions |   | 100 |   |

    Less: Retiree benefits |   | (11 | ) |

  | | | |

  End of the year | $ | 737 | |

| | | |

Plan assets at fair value December 31 is $737

E 17–7 Changes in plan assets; determine cash contributions

Pension data for Fahy Transportation Inc. include the following

Required:

Assuming cash contributions were made at the end of the year, what was the amount of those contributions?

E 17–10 Determine pension expense

Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2011, Abbott and Abbott received the following information:

The expected long-term rate of return on plan assets was 10%. There was no prior service cost and a negligible net loss–AOCI on January 1, 2011.

Required:

* 1.Determine Abbott and Abbott’s pension expense for 2011.

* 2.Prepare the journal entries to record Abbott and Abbott’s pension expense, funding, and payment for 2011.

E 17–12 PBO calculations; ABO calculations; present value concepts

Clark Industries has a defined benefit pension plan that specifies annual retirement benefits equal to:

1.2% × Service years × Final year’s salary

Stanley Mills was hired by Clark at the beginning of 1992. Mills is expected to retire at the end of 2036 after 45 years of service. His retirement is expected to span 15 years. At the end of 2011, 20 years after being hired, his salary is $80,000. The company’s actuary projects Mills’s salary to be $270,000 at retirement. The actuary’s discount rate is 7%.

Required:

* 1. Estimate the amount of Stanley Mills’s annual retirement payments for the 15 retirement years earned as of the end of 2011.

1.2% X service years X final year’s salary =

1.2% x...