Northrop Grumman is a leading aerospace/defense company. The company has developed the F-16 fighter, the Apache helicopter, the AWACS early warning airborne radar, and the B-2 Stealth bomber. Grumman, one of the predecessor companies of Northrop Grumman, was the primary contractor for the Lunar Excursion Module (LEM) that landed Neil Armstrong and Buzz Aldrin on the moon in 1969. Information relating to Northrop Grumman€™s pension and other postretirement benefit plans follows.

Based on this information, answer the following questions:
1. Is Northrop Grumman€™s pension plan overfunded or underfunded? How can you tell?
2. Are Northrop Grumman€™s medical and life benefits programs overfunded or underfunded? Explain.
3. As of the end of 2007, does Northrop Grumman€™s pension-related accumulated other comprehensive income increase or decrease its stockholders€™ equity?
4. During 2007, was the actual return on Northrop Grumman€™s pension fund more or less than the expected return?Explain.

Transcribed Image Text:

Medical and Life Benefits Pension Benefits S in millions 2007 2006 2007 Change in Benefit Obligatiorn Benefit obligation at beginning of year Service cost Interest cost $21.484 $20.692 755 1,159 3,341 183 464) 2,867 1,250 164 Plan amendments Actuarial gain Benefits paid Acquisitions, divestitures, transfers and other (103) (64) .157)(I.1 12) (28I) Benefit obligation at end of year 21.484 2,867 Change in Plan Assets Fair value of plan assets at beginning of year Gain on plan assets 21.407 2,275 8,867 2.444 1.157 Benefits paid Acquisitions, divestitures, transfers and other Fair value of plan assets at end of year Funded status 198 (281) 980 77 (186) $1,987) (157).12) 22,891 21,407 $822 Statements of Financial Position Non-current assets Current liability Non-current liability S 46 (70) (68) .339) 840 (1.963) 2033 303 47 (68) (41) Comprehensive Loss Net actuarial loss (975 (1877) (429) $ (545) 479890(9)10 $(750) ,264) 4 (20) Prior service cost and net transition obigation Income tax benefits related to above items (254) (277) 452 Unamortized benefit plan costs Medical and Life Benefits Pension Benefits n millions 2007 2005 2007 2006 2005 Components of Net Periodic Benefit Cost Service cost Interest cost Expected return on plan assets. Amortization of $ 786 755675 52 69 66 183 (1.774) (572)46 (58 (52(49) 1.250 1,159 1,091 164 183 Prior service cost (credit) Net loss from previous years 2 (65) (6) Net periodic benefit cost $ 352 468 410 $I18 $215 $%213