Zio Ltd. established a defined contribution pension plan at the beginning of 20X9. The company will contribute
Question:
Zio Ltd. established a defined contribution pension plan at the beginning of 20X9. The company will contribute 3% of each employee’s salary annually. Total salaries in 20X9 were expected to be $7.3 million. Accordingly, Zio paid $219,000 into the fund. After the year-end, it was determined that actual salaries were $6.5 million. Interest rates are in the range of 6%.
Required:
1. Is pension expense $219,000 or a lesser number? Explain.
2. Assume instead that Zio has agreed to pay $165,000 into the fund at the end of 20X9.
During 20X9, an employee left the company, forfeiting $35,000 of unvested pension benefits earmarked in the pension fund. Calculate the payment to the fund and the pension expense.
3. Assume instead that Zio agreed to pay $150,000 to the pension trustee in 20X9 but, because of cash flow issues, paid only $100,000. Zio agrees to pay the shortfall at the end of 20X11. In 20X10, the company makes a scheduled $150,000 payment to the pension fund for normal 20X10 pension entitlements. The same annual scheduled payment is made in 20X11, plus the $50,000 arrears from 20X9. How much is pension expense and cash paid in each of 20X9, 20X10, and 20X11?
Step by Step Answer:
Intermediate Accounting Volume 2
ISBN: 9781260881240
8th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel