Sweet, Inc. is a furniture manufacturing company with 50 employees. Recently, after a long negotiation with the local labor union, thecompany decided to initiate a pension plan as a part of its compensation plan. The plan will start on January 1, 2025. Each employeecovered by the plan is entitled to a pension payment each year after retirement. As required by accounting standards, the controller ofthe company needs to report the pension obligation (liability). On the basis of a discussion with the supervisor of the PersonnelDepartment and an actuary from an insurance company, the controller develops the following information related to the pension plan:Average length of time to retirementExpected life duration after retirementTotal pension payment expected each year after retirement15 years10 yearsfor all employees; payment made at the end of the year$2,400,000 per yearThe interest rate to be used is 12%.Click here to view factor tablesOn the basis of the information above, determine the present value of the pension obligation (liability). (Round factor values to 5 decimalplaces, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)The present value of pension obligation (liability)

The present value of the pension payments can be calculated using the formula for the present value…

Answered: Sweet, Inc. is a furniture…

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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Stanley-Morgan Industries adopted a defined benefit pension plan on April 12, 2024. The provisions of the plan were not made retroactive to prior years. A local bank, engaged as trustee for the plan assets, expects plan assets to earn a 10% rate of return. The actual return was also 10% in 2024 and 2025.* A consulting firm, engaged as actuary, recommends 5% as the appropriate discount rate. The service cost is $180,000 for 2024 and $230,000 for 2025. Year-end funding is $190,000 for 2024 and $200,000 for 2025. No assumptions or estimates were revised during 2024. *We assume the estimated return was based on the actual return on similar investments at the Inception of the plan and that, since the estimate didn't change, that also was the actual rate in 2025. Required: Calculate each of the following amounts as of both December 31, 2024, and December 31, 2025: Note: Enter your answers in thousands (l.e., 200,000 should be entered as 200). Enter a llability as a negative amount. 1.…
How do I go about calculating pension payouts to determine a company's financial obligation? Additional info is below: Postretirement BenefitsPeyton Approved has revised its postretirement plan. It will now provide health insurance to retired employees. Management has requested that you report the short- and long-term financial implications of this. The company is currently employing 60, and actuaries estimate that the company has a pension liability of $107,041.70. The estimated cost of retired employees’ health insurance is $43,718.91. Prepare adjusting entries for the pension liability and the health insurance liability
On January 1, 2019, Smith Company adopted a defined benefit pension plan. At that time, Smith awarded retroactive benefits to its employees, resulting in a prior service cost that created a projected benefit obligation of $1,250,000 on that date (which it did not fund). Smith decided to amortize the prior service cost by the straight-line method over the 20-year average remaining service life of its active participating employees. Smith’s actuary has also provided the following additional information for 2019 and 2020: (1) service cost: 2019, $147,000; 2020, $153,000; (2) expected (and actual) return on plan assets: 2020, $33,000; and (3) projected benefit obligation: 1/1/2020, $1,522,000. The discount rate was 10% in both 2019 and 2020. Smith contributed $330,000 and $350,000 to the pension fund at the end of 2019 and 2020, respectively. There are no other components of Smith’s pension expense. Required: 1. Compute the amount of Smith’s pension expense for 2019 and 2020. 2.…
On January 1, 2019, Smith Company adopted a defined benefit pension plan. At that time, Smith awarded retroactive benefits to its employees, resulting in a prior service cost that created a projected benefit obligation of $1,250,000 on that date (which it did not fund). Smith decided to amortize the prior service cost by the straight-line method over the 20-year average remaining service life of its active participating employees. Smith’s actuary has also provided the following additional information for 2019 and 2020: (1) service cost: 2019, $145,000; 2020, $152,000; (2) expected (and actual) return on plan assets: 2020, $32,000; and (3) projected benefit obligation: 1/1/2020, $1,520,000. The discount rate was 10% in both 2019 and 2020. Smith contributed $330,000 and $350,000 to the pension fund at the end of 2019 and 2020, respectively. There are no other components of Smith’s pension expense. Required: 1. Compute the amount of Smith’s pension expense for 2019 and 2020. 2.…
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.
wifty Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2020 in which no benefits were paid. 1. The actuarial present value of future benefits earned by employees for services rendered in 2020 amounted to $55,500. 2. The company’s funding policy requires a contribution to the pension trustee amounting to $144,729 for 2020. 3. As of January 1, 2020, the company had a projected benefit obligation of $908,100, an accumulated benefit obligation of $802,100, and a debit balance of $400,100 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $601,200 at the beginning of the year. The actual and expected return on plan assets was $54,100. The settlement rate was 9%. No gains or losses occurred in 2020 and no benefits were paid. 4. Amortization of prior service cost was $50,500 in 2020. Amortization of net gain or loss was not required in 2020. (a)…
The trustee for the Bronson Corporation defined benefit pension plan sent a report to the CEO with the following information for the fiscal year: Beginning balance of plan assets at fair value $ 1,560,000 Actual return on plan assets $ 210,000 Employer’s contribution $ 150,000 Distributions to retirees $ 75,000 Service cost $ 125,000 Interest cost $ 156,000 Loss from changes in benefits or assumptions $ 35,000 Beginning balance of the PBO $ 1,580,000 The ending balance of plan assets is: Multiple Choice $1,770,000. $1,845,000. $1,920,000. $1,955,000.
Hijo Corp. is a publicly accountable entity that operates a defined benefit plan for its employees. Data relating to the pension plan is as follows: Defined benefit obligation (DBO), December 31, 2019 $22,300,000 Plan assets, December 31, 2019 24,500,000 Current service costs (CSC), December 31, 2020 2,200,000 Benefits paid to retirees, December 31, 2020 1,000,000 Actual return on plan assets, December 31, 2020 800,000 DBO, December 31, 2020, per actuary 24,000,000 Yield on high-quality corporate bonds 4% What is the total gain or loss that will flow to the other comprehensive income (OCI) part of the statement of comprehensive income for the year ended December 31, 2020? Question 12 options: a) $572,000 loss b) $180,000 loss c) $212,000 gain d) $392,000 gain

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