S Inc follows ASPE but is planning to switch to IFRS in 2022. Beginning defined benefit obligation (DBO) balance on January 1, 2021 is $1,136. The plan is underfunded by 60% of this amount and the regulatory agencies consider this to be quite heavily underfunded. Past service costs were recorded on January 1, 2021. (The amount is to be determined). The current service costs for 2021 amounted to $280. The plan uses an interest rate of 8%. We recorded an interest expense of $104.48 for 2021. Our investments of the plan assets did very poorly earning only $26.356 on our plan assets in 2021. The corporate pension committee overseeing the plan operations had decided to fund an amount of $70 in addition to our normal annual contributions which we make as per our corporate policy. The company normally contributes 5% of the plan obligations existing at the beginning of the year plus 50% of the current service costs and 60% of any past service costs recorded during the year. Benefit payments for the year, $148. It was determined by the firm’s actuaries that the ending balance of the plan assets appropriately reflected their fair market values. Similarly the projected benefit obligation was revalued at the end of the year. We are pleased that at the revised figure of the ending balance, the plan is now underfunded by 50% of the balance of the DBO at year-end.

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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S Inc follows ASPE but is planning to switch to IFRS in 2022.

Beginning defined benefit obligation (DBO) balance on January 1, 2021 is $1,136. The plan is underfunded by 60% of this amount and the regulatory agencies consider this to be quite heavily underfunded.
Past service costs were recorded on January 1, 2021. (The amount is to be determined). The current service costs for 2021 amounted to $280.
The plan uses an interest rate of 8%. We recorded an interest expense of $104.48 for 2021.
Our investments of the plan assets did very poorly earning only $26.356 on our plan assets in 2021.
The corporate pension committee overseeing the plan operations had decided to fund an amount of $70 in addition to our normal annual contributions which we make as per our corporate policy. The company normally contributes 5% of the plan obligations existing at the beginning of the year plus 50% of the current service costs and 60% of any past service costs recorded during the year.
Benefit payments for the year, $148.
It was determined by the firm’s actuaries that the ending balance of the plan assets appropriately reflected their fair market values.
Similarly the projected benefit obligation was revalued at the end of the year. We are pleased that at the revised figure of the ending balance, the plan is now underfunded by 50% of the balance of the DBO at year-end.

The plan assets fair value at January 1, 2021 is:

$681.60

$454.40

$1,136.00

$1,893.33

None of these answers

The present value of past service cost incurred at the beginning of the period is:

$280.00

$36.35

$170.00

$0.00

None of these answers

The total contribution funded during 2021 is:

$70.00

$368.80

$266.80

$288.61

None of these answers

The total pension expense for the year ended 2021 is:

$268.13

$358.13

$528.13

$388.76

None of these answers

The ending balance of the defined benefit obligation is:

$1403.11 Cr.

$701.56 Dr.

$701.56 Cr.

$1,838.48 Cr.

The amount of the pension expense the company would report had it followed IFRS in 2021 is:

$368.80

$518.13

$388.76

$528.13

None of these answers

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