Assume a employee has a salary of $ 75,000. The employee's salary is expected to grow at 2.5% per annum. The employee is expected work 25 yearsand then retire. The pension program provides the employee a defined benefit equal to 2.0% of his salary in year 25 for each year worked. Theemployee has a expected life expectancy of 35 years at retirement. The firm uses a 4% discount rate to determine pension obligations.The firm anticipates depositing $9,000 at the end of each year to fund their retirement obligation. Funds are expected to earn and do earn 6.0 per centper annum.1.2.3.4.5.What is the pension cost in years 2 and 3What is the over(under) pension funding at the end of year 3.Explain the logic for each of the three components of a firm's pension expense in any given yearChange the discount rate to 5%. (corrected from an earlier posting that had it at 4%) What is the $ change in the underfunding in year 3?Explain the logic of the change in underfunding.

To calculate the pension cost in years 2 and 3, we need to determine the present value of the…

1. 2. 3. 4. 5. What is the pension cost in years 2 and 3 What is the over(under) pension funding at the end of year 3. Explain the logic for each of the three components of a firm's pension expense in any given year Change the discount rate to 5%. (corrected from an earlier posting that had it at 4%) What is the $ change in the underfunding in year 3? Explain the logic of the change in underfunding.

1. 2. 3. 4. 5. What is the pension cost in years 2 and 3 What is the over(under) pension funding at the end of year 3. Explain the logic for each of the three components of a firm's pension expense in any given year Change the discount rate to 5%. (corrected from an earlier posting that had it at 4%) What is the $ change in the underfunding in year 3? Explain the logic of the change in underfunding.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You are a pension fund manager who has obligations over the years to come of: t: 1 2 3 5 CF: 6.5 7 2.5 13.5 The applicable rate is: 0.095 What is the modified duration of this pension obligation? O3.0977 3.3360 3.2050 2.9786 3.4361 13
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10. Newton Inc offers its employees a defined benefit pension plan. Newton Inc reports under US GAAP. It records actuarial gains and losses in Other Comprehensive Income (OCI) and amortizes these amounts over the average remaining service life of its employees when they exceed a threshold. Newton Inc did not record any past service cost in fiscal year 2021. Below you can find excerpts from Newton's pension footnotes: 4+1 f Service cost Interest cost Expected return on plan assets Actual return on plan assets Contributions to defined benefits plan Benefits paid Pension liability Accumulated OCI losses related to defined benefit plans a. £6,950 b. £6,600 c. £6,250 d. £8,150 e. None of the above 2020 £3,300 £1,600 £2,100 £1,900 £2,000 £1,250 What is your best approximation of the net pension expenses recorded in P&L related to defined benefit plans in fiscal year 2021? ANSWER: C £35,000 £4,500 2021 £3,500 £1,750 £1,900 £2,000 £2,100 £1,350 £42,500 £5,100
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* Your answer is incorrect. The following data are for the pension plan for the employees of Cullumber Company. Accumulated benefit obligation Projected benefit obligation Plan assets (at fair value) AOCL - net loss Settlement rate (for year) Expected rate of return (for year) 1/1/25 $5034000 O $624000. $424000. • $334000. $534000. 5434000 4634000 0 12/31/25 $5234000 5658000 6034000 994000 9% 7% 12/31/26 $6834000 7434000 6658000 1034000 8% 6% Cullumber's contribution was $874000 in 2026 and benefits paid were $784000. Cullumber estimates that the average remaining service life is 15 years. The actual return on plan assets in 2026 was
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The Pension Protection Act of 2006 requires companies to correct funding shortfalls in their defined benefit plans within: A. 5 years B. 3 years C. 10 years D. 20 years E. 1 year
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