(a) How much pension expense (revenue) does DuPont report in its 2012 income statement? DuPont reports pension = of $0 million. (b) DuPont reports a $1,517 million expected return on pension plan assets as an offset to 2012 pension expense. Estimate what the expected return would have been had Dupont not changed the assumption on the expected return in 2012. (Round your dollar answers to the nearest whole number.) $0 million What is DuPont's actual gain or loss realized on its 2012 pension plan assets? 0 ($ million) (c) What main factors affected DuPont's pension plan assets and pension liability during 2012? Oinvestment gains and employer contributions increased the plan assets. Service costs, interest costs, and actuarial losses increased the pension liability, and benefit payments reduced the liability. Benefits were paid directly by the company and did not affect plan assets Oinvestment gains and employer contributions increased the plan assets, and benefits paid reduced plan assets. Service costs and actuarial losses increased the pension liability, and benefit payments reduced the liability. Interest reflects the amount the company paid to its lenders and did not affect the pension obligation directly. Oinvestment gains and employer contributions increased the plan assets, and benefits paid reduced plan assets. Service costs, interest costs and actuarial losses increased the pension liability, and benefit payments reduced the liability. Oinvestment gains and employer contributions increased the plan assets, and benefits paid reduced plan assets. Service costs, interest costs and actuarial losses decreased the pension liability, and benefit payments reduced the liability. (d) What does the term funded status mean? What is the funded status of the 2012 DuPont pension plans? O"Funded status" reveals how much cash the plan has. O"Funded status" reflects the contributions that the company has made to the plan. O"Funded status" is the excess or deficiency of the pension obligation over plan assets. O"Funded status" refers to the extent to which the plan assets are invested in mutual funds. DuPont's pension plan is = by $ 0 million (e) DuPont decreased its discount rate from 5.32% to 4.32% in 2012. What effect(s) does this decreasehave on its balance sheet and its income statement? OA decrease in the discount rate increases the PBO and increases pension cost. OA decrease in the discount rate increases the PBO and decreases pension cost. OA decrease in the discount rate reduces the PBO and decreases pension cost. OA decrease in the discount rate increases the PBO and has no effect on pension cost. (f) How did DuPont's pension plan affect the company's cash flow in 2012? OThe company's cash flow increased as the increase in pension assets more than offset the increase in the PBO. OThere was no effect on the company's cash flow as all benefit payments are paid from plan assets. OThe company contributed cash to its pension plan in 2012. This contribution directly affected the company's cash flow. OThe company's cash flow increased by the gains on the plan's investment portfolio and decreased by the benefits paid to plan participants. (g) Explain how the returns on pension assets affect the amount of cash that DuPont must contribute to fund the pension plan. Oshould pension investments decline as a result of a decline in the financial markets, DuPont might be required to increase its cash contribution to the pension plan. OAsset returns have no effect on DuPont's cash flow because they are recognized in the pension plan and not on the company's financial statements. OAsset returns have no effect on DuPont's cash flow because increases in the PBO provide whatever financing the plan needs. OAsset returns have no effect on DuPont's cash flow because employee contributions make up any shortfall. Analyzing and Interpreting Pension Disclosures E.I. Du Pont De Nemours and Co.'s 10-K report has the following disclosures related to its retirement plans ($ millions). Obligations and Funded Status December 31 ($ millions) Change in benefit obligation Pension Benefits 2012 2011 Benefit obligation at beginning of year $27,083 $23,924 Service cost 277 249 1,165 1,253 24 21 Interest cost Plan participants' contributions Acturarial loss Benefits paid Amendments Net effects of acquisitions/divestitures Benefit obligation at end of year Change in plan assets Fair value of plan assets at beginning of year Actual gain on plan assets Employer contributions Plan participants' contributions Benefits paid 2,245 3,062 (1,593) (1,610) (22) 2 182 $29,179 $27,083 $ 17,794 $18,403 2,326 471 848 341 24 21 (1,593) (1,610) Net effects of acquisitions/divestitures 168 Fair value of plan assets at end of year $19,399 $17,794 Funded status U.S. plans with plan assets $(6,625) $892 Non-U.S. plans with plan assets All other plans (1,443) (317) (1,712) (1,515) Total Amount recognized in the Consolidated Balance Sheets consist of: $(9,780) $ (9,289) Other assets Other accrued liabilities Other liabilities Liabilities related to assets held for sale Net amount recognized $5 (4) (110) (107) (9,303) (9,186) (372) (9,780) (9,289) Pension Benefits (in millions) Components of net periodic benefit cost (credit) 2012 2011 2010 Net periodic benefit Service cost $277 $249 $207 Interest cost 1,165 1,253 1,262 Expected return on plan assets (1,517) (1,475) (1,435) Amortization of loss 887 613 507 Amortization of prior service cost 13 16 16 Curtailment/settlement loss 7 - Net periodic benefit cost $832 $656 $557 Weighted-avg. assumptions used for net periodic benefit cost for years ended Dec. 31 2012 2011 2010 Discount Rate Expected return on plan assets Rate of compensation increase 4.32% 5.32% 5.80% 8.61% 8.73% 8.64% 4.18 % 4.24 % 4.24% The following benefit payments, which reflect future service, as appropriate, are expected to be paid: ($ millions) Pension Benefits 2013 2014 2015 2016 2017 Years 2018-2022 $1,629 1,604 1,629 1,637 1,667 8,678 HINT: Do not use negative signs with your answers.