Sheridan Ltd. initiated a one-person pension plan in January 2015 that promises the employee a pension on retirement according to the following formula: pension benefit -2.6% of final salary per year of service after the plan initiation. The employee began employment with Sheridan early in 2015 at age 33 and expects to retire at the end of 2041, the year in which he turns 60. His life expectancy at that time is 21 years. Assume that this employee earned an annual salary of $49,000 when he joined Sheridan, that his salary was expected to increase at a rate of 4% per year, and that this remains a reasonable assumption to date. Sheridan considers a discount rate of 8% to be appropriate. (a) X Your answer is incorrect. What is the employee's expected final salary? (Round your answer to O decimal places, e.g. 5,275.)

Sheridan Ltd. initiated a one-person pension plan in January 2015 that promises the employee a pension on retirement according to the following formula: pension benefit -2.6% of final salary per year of service after the plan initiation. The employee began employment with Sheridan early in 2015 at age 33 and expects to retire at the end of 2041, the year in which he turns 60. His life expectancy at that time is 21 years. Assume that this employee earned an annual salary of $49,000 when he joined Sheridan, that his salary was expected to increase at a rate of 4% per year, and that this remains a reasonable assumption to date. Sheridan considers a discount rate of 8% to be appropriate. (a) X Your answer is incorrect. What is the employee's expected final salary? (Round your answer to O decimal places, e.g. 5,275.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

A corporation's pension plan provides a lifetime annual income to its employees upon retirement at age 65. The plan provides 3% for each year of service of the employee's salary upon retirement. Those who retire before 65 have their benefit reduced by 1.3% for each year before 65 that they retire. Russ retires at age 61 with 29 years of service. If his salary upon retirement is $76,763, what is his annual pension benefit? Round your answer to the nearest dollar.
Ivanhoe, Inc. has a defined-benefit pension plan covering its 50 employees. Ivanhoe agrees to amend its pension benefits. As a result, the projected benefit obligation increased by $2790000. Ivanhoe determined that all its employees are expected to receive benefits under the plan over the next 5 years. In addition, 10 employees are expected to retire or quit each year. Assuming that Ivanhoe uses the years-of-service method of amortization for prior service cost, the amount reported as amortization of prior service cost in year one after the amendment is $558000. O $651000. $930000. O $186000.
D Company is evaluating amendments to its pensions plans. Plan 1 covers its salaried employees and Plan 2 provides benefits to its hourly workers. On January 1, 2016, D will grant employees in Plan 2 additional pension benefits of P240,000 based on their past service. Employees in this plan have an average period to vesting of 8 years. Plan 1 will be amended to reduce benefits by P120,000 (in exchange, employees will receive increased contributions to the company’s defined contribution plan). Employees in this plan have an average period to vesting of 6 years. What is the total past service cost included in pension expense 2016?
Frazier Refrigeration amended its defined benefit pension plan on December 31, 2018, to increase retirement benefits earned with each service year. The consulting actuary estimated the prior service cost incurred by making theamendment retroactive to prior years to be $110,000. Frazier’s 100 present employees are expected to retire at therate of approximately 10 each year at the end of each of the next 10 years.Required:1. Using the service method, calculate the amount of prior service cost to be amortized to pension expense ineach of the next 10 years.2. Using the straight-line method, calculate the amount of prior service cost to be amortized to pension expensein each of the next 10 years.
Carla Vista, Inc. on January 1, 2021 initiated a noncontributory, defined-benefit pension plan that grants benefits to its 109 employees for services rendered in years prior to the adoption of the pension plan. The total expected service-years of the 109 employees who are expected to receive benefits under the plan is 1,308. An actuarial consulting firm has indicated that the present value of the projected benefit obligation on January 1, 2021 was $5,628,000. On December 31, 2021 the following information was provided concerning the pension plan's operations for its first year. Employer's contribution at end of year Service cost Projected benefit obligation Plan assets (at fair value) Expected return on plan assets Settlement rate (a) $1,690,000 Pension expense 690,000 6,606,600 1,690,000 gas 8% Compute the pension expense recognized in 2021. Assume the prior service cost is amortized over the average remaining service life of the employees.
arasota Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2020 are as follows. Employee Future Years of Service Jim 3 Paul 4 Nancy 5 Dave 6 Kathy 6 On January 1, 2020, the company amended its pension plan, increasing its projected benefit obligation by $74,880.Compute the amount of prior service cost amortization for the years 2020 through 2025 using the years-of-service method, setting up appropriate schedules. Year Annual Amortization 2020 $enter a dollar amount 2021 enter a dollar amount 2022 enter a dollar amount 2023 enter a dollar amount 2024 enter a dollar amount 2025 enter a dollar amount
On December 31, 2020, Stormy & Co. started a defined benefit plan for its president. The plan provides for an annual pension to the executive, equal to 2% of the executive’s highest lifetime salary multiplied by number of years of service within the entity. On date of establishment, the president already has worked for ten years, and his current salary as of this date is P500,000. The president is expected to retire in 25 years, and his/her salary is expected to increase by 3% on average. He/she is also estimated to have a life expectancy of 15 years after retirement and will receive his/her annual pension at the end of each year after retirement. Market yield of high-quality corporate bonds is 8%. Below is the relevant PV and Future Value (FV) factors:· Future value of 1 at 3% for 25 periods: 2.094· PV of an ordinary annuity at 8% for 15 periods: 8.559· PV of 1 at 8% for 25 periods: 0.146How much is the projected benefit obligation upon establishment of the…
The Kollar Company has a defined benefit pension plan. Pension information concerning the fiscal years 2024 and 2025 are presented below ($ in millions): Information Provided by Pension Plan Actuary: a. Projected benefit obligation as of December 31, 2023 = $3,350. b. Prior service cost from plan amendment on January 2, 2024 = $650 (straight-line amortization for 10-year average remaining service period). c. Service cost for 2024 = $650. d. Service cost for 2025 = $700. e. Discount rate used by actuary on projected benefit obligation for 2024 and 2025 = 10%. f. Payments to retirees in 2024 $510. g. Payments to retirees in 2025 $580. h. No changes in actuarial assumptions or estimates. 1. Net gain-AOCI on January 1, 2024 = $375. J. Net gains and losses are amortized for 10 years in 2024 and 2025. Information Provided by Pension Fund Trustee: a. Plan asset balance at fair value on January 1, 2024 = $2,400. b. 2024 contributions $670. c. 2025 contributions $720. d. Expected long-term rate…
On September 1, 2016, Reality Corporation offered special termination benefits to employees who had reached the early age retirement specified on the company’s pension plan. Termination benefits consists of: Lump sum and periodic future payments. The employees accepting the company offer receive the usual early retirement pension benefits. The offer expires on November 30, 2016. Actual or reasonably estimated amounts on December 31, 2016 relating to the employees accepting the offer are the following: Lump sum payments made 574,000 on January 1, 2017. Present value of periodic payments 155,000 of $60,000 annually for 3 years which will begin January 1, 2017. Reduction of accrued pension cost of 45,000 on December 31, 2016 for the terminating employees. What is the amount to be reported as total liability for termination benefits on December 31, 2016?
Cullumber Company has 120 employees who are expected to receive benefits under the company's defined-benefit pension plan. The total number of service-years of these employees is 1,200. The actuary for the company's pension plan calculated the following net gains and losses: For the Year EndedDecember 31 (Gain) Or Loss 2020 $560,000 2021 (474,000) 2022 910,000 Prior to 2020, there was no unrecognized net gain or loss.Information about the company's projected benefit obligation and market-related (and fair) value of plan assets follows: As of January 1 2020 2021 2022 Projected benefit obligation $2,020,000 $2,260,000 $2,860,000 Fair value of plan assets 1,600,000 2,380,000 2,470,000 Based on the above information about Cullumber Company, prepare a schedule which reflects the amount of net gain or loss to be amortized by the company as a component of pension expense for the years 2020, 2021, and 2022. The company amortizes…
D
Sheridan Company has 160 employees who are expected to receive benefits under the company's defined-benefit pension plan. The total number of service-years of these employees is 1,600. The actuary for the company's pension plan calculated the following net gains and losses: For the Year EndedDecember 31 (Gain) Or Loss 2020 $600,000 2021 (514,000) 2022 950,000 Prior to 2020, there was no unrecognized net gain or loss.Information about the company's projected benefit obligation and market-related (and fair) value of plan assets follows: As of January 1 2020 2021 2022 Projected benefit obligation $2,060,000 $2,300,000 $2,900,000 Fair value of plan assets 1,640,000 2,420,000 2,510,000 Based on the above information about Sheridan Company, prepare a schedule which reflects the amount of net gain or loss to be amortized by the company as a component of pension expense for the years 2020, 2021, and 2022. The company amortizes…