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Q20-10IFRS

Expert-verified
Intermediate Accounting (Kieso)
Found in: Page 1192

Short Answer

Linda Berstler Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan.

January 1, 2017 December 31, 2017

Defined benefit obligations $2,500 $3,300

Plan assets (fair value) 1,700 2,620

Discount rate 10%

Pension asset/liability 800 ?

Service cost for the year 2017 400

Contributions (funding in 2017) 700

Benefits paid in 2017 200

Instructions

(a) Compute the actual return on the plan assets in 2017.

(b) Compute the amount of other comprehensive income (G/L) as of December 31, 2017. (Assume the January 1, 2017, balance was zero.)

Answer

The actual return on the plan assets is $420.

The net pension liability loss for the company is $100.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Definition of Pension Plan

A pension plan refers to a scheme in which an employer promises a specified payment to its employees in the form of regular payments or a lump-sum at the time of their retirement.

Step 2: Computation of actual return on plan assets

Particulars

Amounts ($)

Closing balance of plan assets

2,620

Less: Fund available after benefit paid (Working note)

(2,200)

Actual return on plan assets

$420

Working note:

Computation of fund available after benefit paid:

Particulars

Amounts ($)

Opening balance of the plan assets

1,700

Add: Contribution

700

Total fund available

2,400

Less: Benefit paid

(200)

Fund available after benefit paid

2,200

Step 3: Computation of other comprehensive income

Particulars

Amounts ($)

Closing projected benefit obligation

3,300

Add: Benefit

200

Less: Opening projected benefit obligation

(2,500)

Less: Interest cost on beginning projected obligation (2,500*10%)

(250)

Less: Service cost

(400)

Liability gain or loss (A)

350

Closing value of plan assets

2,620

Add: Benefits

200

Less: Opening value of plan assets

(1,700)

Less: Contribution

(700)

Less: Expected return on plan assets (1700*10%)

(170)

Unexpected return on plan assets (B)

250

Net pension liability loss (A-B)

(100)

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