Question

PENCOMP’s statement of financial position at December 31, 2010, is as follows.


Additional information concerning PENCOMP’s defined benefit pension plan is as follows.
Defined benefit obligation at 12/31/10 ...............................€ 820.5
Plan assets (fair value) at 12/31/10 .......................................476.5
Unamortized past service cost at 12/31/10 ...........................150.0
Amortization of past service cost during 2011........................15.0
Service cost for 2011 ..............................................................42.0
Discount rate ...........................................................................10%
Expected rate of return on plan assets in 2011 .......................12%
Actual return on plan assets in 2011 .......................................10.4
Contributions to pension fund in 2011 ...................................70.0
Benefits paid during 2011 ......................................................40.0
Pension liability at 12/31/10 .................................................102.0
Unamortized net loss due to changes in actuarial assumptions
and deferred net losses on plan assets at 12/31/10 ..................92.0
Expected remaining service life of employees.........................15.0
Average period to vesting of past service costs ......................10.0
Other information about PENCOMP is as follows.
Salary expense, all paid with cash during 2011 ..................€ 700.0
Sales, all for cash ................................................................3,000.0
Purchases, all for cash ........................................................2,000.0
Inventory at 12/31/2011 .....................................................1,800.0
Property originally cost €2,000 and is depreciated on a straight-line basis over 25 years with no residual value. Interest on the note payable is 10% annually and is paid in cash on 12/31 of each year. Dividends declared and paid are €200 in 2011.
Accounting
Prepare an income statement for 2011 and a statement of financial position as of December 31, 2011. Also, prepare the pension expense journal entry for the year ended December 31, 2011. Round to the nearest tenth
Analysis
Compute return on equity for PENCOMP for 2011 (assume equity is equal to year-end equity). Do you think an argument can be made for including some or even all of the past service cost and actuarial gains and losses in the numerator of return on equity? Illustrate that calculation.
Principles
Explain a rationale for why the IASB has (so far) decided to exclude from the current-period income statement the effects of pension plan amendments and gains and losses due to changes in actuarialassumptions.


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  • CreatedJune 17, 2013
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