Chapter 17, Problem 17.7P

Determining the amortization of net gain

• LO17–6

Herring Wholesale Company has a defined benefit pension plan. On January 1, 2018, the following pension-related data were available:

	($ in thousands)
Net gain—AOCI	$ 170
Accumulated benefit obligation	1,170
Projected benefit obligation	1,400
Fair value of plan assets	1,100
Average remaining service period of active employees (expected to remain constant for the next several years)	15 years

The rate of return on plan assets during 2018 was 9%, although it was expected to be 10%. The actuary revised assumptions regarding the PBO at the end of the year, resulting in a $23,000 decrease in the estimate of that obligation.

Required:

1. Calculate any amortization of the net gain that should be included as a component of net pension expense for 2018.

2. Assume the net pension expense for 2018, not including the amortization of the net gain component, is $325,000. What is pension expense for the year?

3. Determine the net loss—AOCI or net gain—AOCI as of January 1, 2019.