Wolz Company, a small business, has had a defined benefit pension plan for its employees for several
Question:
Wolz Company, a small business, has had a defined benefit pension plan for its employees for several years. At the beginning of 2007 the company amended the pension plan; this amendment provides for increased benefits based on services rendered by certain employees in prior periods. The company’s actuary has determined that the related unrecognized prior service cost amounts to $140,000. The company has four participating employees who are expected to receive the increased benefits. The following is a schedule identifying the employees and their expected years of future service:
Employee Expected Years of
Numbers Future Service
1 .........2
2 .........3
3 .........4
4 .........5
Required
1. Using the straight-line method,
(a) Compute the average remaining service life, and
(b) Prepare a schedule to amortize the unrecognized prior service cost.
2. Using the years-of-future-service method instead, prepare a set of schedules to determine
(a) The amortization fraction for each year, and
(b) The amortization of the unrecognized prior service cost.
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones