Chapter 17, Problem 17.6P

1.

To determine

Projected benefit obligation (PBO): This is the estimated present value of future retirement benefits, accumulated based on the future compensation levels.

To Compute: The PBO for the year December 31, 2018.

2.

To determine

Plan assets: The assets which are used to satisfy the postretirement obligation, are held as a pension fund by the trustee, to invest the employer contributions, accumulate the earnings on investments, and pay the contributions plus earnings to the retired employees, are referred to as plan assets.

To Compute: The plan assets for the year December 31, 2018.

3.

To determine

Pension expense: Pension expense is an expense to the employer paid as compensation after the completion of services performed by the employees.

Pension expense includes the following components:

• Service cost
• Interest cost
• Expected return on plan assets
• Amortization of prior service cost
• Amortization of net loss or net gain

To Compute: The pension expense for the year December 31, 2018.

4.

To determine

Net pension (liability) or asset: It is the financial item which is recorded in the balance sheet when the postretirement benefit obligation (PBO) exceeds the plan assets. If plan assets exceed PBO, net pension assets arise.

To Compute: The net pension (liability) or asset for the year December 31, 2018.