are you able to help with this? the question and notes are attached

Question 1a) Settlement rate is the same as interest rate or discount rate. It is the rate used to determine the interest cost related to the Projected Benefit Obligation (PBO). (Note - "Settlement rate" is not to be confused with "Settlement". Settlement is when the plan assets gets so large that the Pension sells the assets and then purchase an annuity) The question mentions that the Plan Assets = 800,000 but the Net Pension Asset = 100,000. Therefore the Projected Benefit Obligation (PBO) must = 700,000. Please note that if the Plans Assets > the PBO , then we have Net Pension Assets of the difference i.e. Plan Assets - PBO (800,000 - 700,000 = 100,000 in this case). Conversely, if PBO > Plan Assets, then we have a Net Pension Liability The Interest cost mentioned at the first bullet point above = Settlement Rate (or Interest Rate or Discount Rate) x PBO at beginning of year i.e. 20% x 700,000 The main components of the Pension Expense figure that goes into the Income Statement are as follows: o The Service Cost o The Interest Cost (This is sometimes provided explicitly or has to be computed as shown above) o Expected Return (The serves to reduce the Pension Expense as it is actually a benefit/revenue. It is sometimes determined by multiplying an expected rate x the beginning (fair value) of the plan assets) o Amortization of Prior Service Costs (PSC) o Amortization of Gains or Losses in Other Comprehensive Income (OCI) Note the Gains/Losses first hit OCI and which then gets amortized back into the Income Statement using the corridor approach. The Gains/Losses occur for 2 main reasons. 1) They represent unexpected gains/loss vs the expected Return. That is, when the Actual Return differs from the Expected Return on Plan Assets, then the difference goes to OCI. 2) When there has been a change in actuarial assumptions which either increase (loss) or decrease (gain) the PBO. o Curtailments could also impact the Pension Expense computation Please also note that any payments made to retirees do not affect the employer's pension accounting records, but rather affects just the pension plan's own accounting records. As a reminder, the Employer (i.e. sponsoring company) is a separate entity from the Pension Plan. Each entity has its own accounting. Throughout this course we are concerned with the Employer's pension accounting. Although journal entires were not called for in this question, this is an outline of what they would look like: Dr. Pension Expense XXXXX (As computed above) Dr. OCI- Gains/Losses XXXXX (Note 1 below) Cr. OCI - PSC XXXXX (Note 2 below) Cr. Cash XXXXX (Note 3 below) Cr. Pension Asset/Liability XXXXX (Note 4 below) Note 1 - Tthis would be the net total of any unexpected gain/losses on the plan assets and any gain/losses due to changes in assumptions, assuming that the net result is a loss. If the net result were a gain, then this account would be credited ) Note 2 - For any amortized PSC Note 3 - For contributions made to the Pension fund by the company Note 4 - This also represent the change in the Net Pension Asset/Liability for the year i.e. the change from beginning of year to end of year in the difference between Plan Assets and PBO) Question 1b) The corridor approach looks at the beginning balance in OCI and compares it to 10% of the greater of the Plan Assets or the PBO. If the OCI balance is more than this 10%, then the excess gets amortized based on the average remaining service life of employees for that year. If the OCI balance is not more that this 10% then there is no need for amortization using corridor approach. For this particular question, the beginning PBO for 2010 was 1,700,000 and the (net) Pension Liability was 200,000. This means that the Plans Assets = 1,500,000 (Recall from above that if the Plans Assets > the PBO , then we have Net Pension Assets of the difference, while if the Plan Assets