Lowell Company sponsors a defined benefit pension plan for its 600 employees. The companys actuary provided the
Question:
Lowell Company sponsors a defined benefit pension plan for its 600 employees. The company’s actuary provided the following information about the plan.
The average remaining service life per employee is 20 years. The service cost component of net periodic pension expense for employee services rendered amounted to $400,000 in 2010 and $475,000 in 2011. The unrecognized past service cost on January 1, 2010, was $1,155,000. The average service period to vesting is 10 years. No benefits have been paid.
Instructions
(a) Compute the amount of unrecognized past service cost to be amortized as a component of net periodic pension expense for each of the years 2010 and 2011.
(b) Prepare a schedule that reflects the amount of unrecognized net gain or loss to be amortized as a component of net periodic pension expense for 2010 and 2011, using the corridor approach.
(c) Determine the total amount of net periodic pension expense to be recognized by Lowell Company in 2010 and 2011.
(d) Determine pension expense, assuming Lowell chooses to immediately recognize actuarial gains and losses in netincome.
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0470616314
IFRS edition volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield