- What roles does an Actuary play?What other industries does an actuary work?
- Will companies benefit by obtaining and retaining quality employees by offering a 401K Plan that includes company matching? From an opposing or opposite view…as an Accountant you may be asked to conduct an analysis of Employee Costs (includes 401K Matching); what importance would you place upon the 401K Matching if you were to advise management?
2-1 What type of Plan does a 401K fall under?
3 Why does the IRS impose limits?
4 Explain alternative measures for valuing the pension obligation.
5 How do we account for Actual Return(s) on Plan Assets? How does the respective return affect the Pension Liability?
6 What is the difference between a Defined Contribution Plan and Defined Benefit Plan?
7 Who assumes the risk in each of these plans?
Comparative Analysis Case
The Coca-Cola Company and PepsiCo, Inc.
The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies’ complete annual reports, including the notes to the financial statements, are available online.
Instructions
Use the companies’ financial information to answer the following questions.
(a) What are the amounts of Coca-Cola’s and PepsiCo’s provision for income taxes for the year 2014? Of each company’s 2014 provision for income taxes, what portion is current expense and what portion is deferred expense?
(b) What amount of cash was paid in 2014 for income taxes by Coca-Cola and by PepsiCo?
(c) What was the U.S. federal statutory tax rate in 2014? What was the effective tax rate in 2014 for Coca-Cola and PepsiCo? Why might their effective tax rates differ?
(d) For year-end 2014, what amounts were reported by Coca-Cola and PepsiCo as (1) gross deferred tax assets and (2) gross deferred tax liabilities?
(e) Do either Coca-Cola or PepsiCo disclose any net operating loss carrybacks and/or carryforwards at year-end 2014? What are the amounts, and when do the carryforwards expire?
Question 16
Given the following items and amounts, compute the actual return on plan assets: fair value of plan assets at the beginning of the period $9,450,000; benefits paid during the period $1,430,000; contributions made during the period $1,040,000; and fair value of the plan assets at the end of the period $10,090,000.
Actual return on plan assets $
Brief Exercise 20-1
AMR Corporation (parent company of American Airlines) reported the following (in millions).
Service cost $366
Interest on P.B.O. 737
Return on plan assets 593
Amortization of prior service cost 13
Amortization of net loss 154
Compute AMR Corporation’s pension expense. (Enter answer in millions.)
Pension expense $
millions
Brief Exercise 20-5
Sarasota Corporation amended its pension plan on January 1, 2017, and granted $151,240 of prior service costs to its employees. The employees are expected to provide 1,990 service years in the future, with 340 service years in 2017.
Compute prior service cost amortization for 2017.
Prior service cost amortization for 2017 $
Brief Exercise 20-6
At December 31, 2017, Ivanhoe Corporation had a projected benefit obligation of $567,100, plan assets of $344,400, and prior service cost of $120,900 in accumulated other comprehensive income.
Determine the pension asset/liability at December 31, 2017. (Enter liability using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Pension asset/liability at December 31, 2017 $
Brief Exercise 20-8
Indigo Corporation has the following balances at December 31, 2017.
Projected benefit obligation $2,474,000
Plan assets at fair value 1,851,000
Accumulated OCI (PSC) 1,126,000
What is the amount for pension liability that should be reported on Indigo’s balance sheet at December 31, 2017?
Pension liability balance at December 31, 2017 $
Brief Exercise 20-10
Stellar Corp. has three defined benefit pension plans as follows.
Pension Assets
(at Fair Value) Projected Benefit
Obligation
Plan X $638,000 $491,000
Plan Y 980,000 751,000
Plan Z 588,000 640,000
How will Stellar report these multiple plans in its financial statements?
Pension Asset $
Pension Liability $
Brief Exercise 20-11
Windsor Corporation has the following information available concerning its postretirement benefit plan for 2017.
Service cost $41,500
Interest cost 49,600
Actual and expected return on plan assets 27,900
Compute Windsor’s 2017 postretirement expense.
Postretirement expense 2017 $
Exercise 20-19
Skysong Co. provides the following information about its postretirement benefit plan for the year 2017.
Service cost $ 42,100
Contribution to the plan 9,700
Actual and expected return on plan assets 10,500
Benefits paid 21,400
Plan assets at January 1, 2017 102,100
Accumulated postretirement benefit obligation at January 1, 2017 330,200
Discount rate 10 %
Compute the postretirement benefit expense for 2017.
Postretirement benefit expense $
Exercise 20-21
Culver Inc. provides the following information related to its postretirement benefits for the year 2017.
Accumulated postretirement benefit obligation at January 1, 2017 $729,100
Actual and expected return on plan assets 36,400
Prior service cost amortization 22,700
Discount rate 11 %
Service cost 80,100
Compute postretirement benefit expense for 2017.
Postretirement benefit expense $
Exercise 20-23
Ayayai Co. provides the following information about its postretirement benefit plan for the year 2017.
Service cost $86,000
Prior service cost amortization 3,100
Contribution to the plan 54,200
Actual and expected return on plan assets 58,700
Benefits paid 41,900
Plan assets at January 1, 2017 702,500
Accumulated postretirement benefit obligation at January 1, 2017 758,600
Accumulated OCI (PSC) at January 1, 2017 96,700 Dr.
Discount rate 9 %
Prepare a worksheet inserting January 1, 2017, balances, showing December 31, 2017, balances, and the journal entry recording postretirement benefit expense. (Enter all amounts as positive.)
AYAYAI CO.
Postretirement Benefit Worksheet—2017
General Journal Entries Memo Record
Items Annual Postretirement
Expense Cash OCI—Prior
Service Cost Postretirement Asset/
Liability APBO Plan Assets
Balance, Jan. 1, 2017 $
$
$
$
$
$
Service cost
Interest cost
Actual return
Contributions
Benefits
Amortization of PSC
Journal entry for 2017 $
$
Accumulated OCI, Dec. 31, 2016
Balance, Dec. 31, 2017 $
$
$
$
Exercise 20-3 (Part Level Submission)
Marigold Company provides the following information about its defined benefit pension plan for the year 2017.
Service cost $91,300
Contribution to the plan 102,900
Prior service cost amortization 9,500
Actual and expected return on plan assets 64,800
Benefits paid 39,400
Plan assets at January 1, 2017 648,700
Projected benefit obligation at January 1, 2017 694,400
Accumulated OCI (PSC) at January 1, 2017 150,900
Interest/discount (settlement) rate 9 %
(a)
Prepare a pension worksheet inserting January 1, 2017, balances, showing December 31, 2017. (Enter all amounts as positive.)
MARIGOLD COMPANY
Pension Worksheet—2017.
General Journal Entries Memo Record
Items Annual
Pension Expense Cash OCI
Prior Service Cost Pension Asset/
Liability Projected Benefit
Obligation Plan
Assets
Balance, January 1, 2017 $
$
$
$
$
$
Service cost
Interest cost
Actual return
Amortization of PSC
Contributions
Benefits
Journal entry for 2017 $
$
Accumulated OCI, Dec. 31, 2016
Balance, Dec. 31, 2017 $
$
$
$
(b)
The parts of this question must be completed in order. This part will be available when you complete the part above.
Exercise 20-11 (Part Level Submission)
Whispering Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2017 in which no benefits were paid.
1. The actuarial present value of future benefits earned by employees for services rendered in 2017 amounted to $56,100.
2. The company’s funding policy requires a contribution to the pension trustee amounting to $144,590 for 2017.
3. As of January 1, 2017, the company had a projected benefit obligation of $901,000, an accumulated benefit obligation of $807,400, and a debit balance of $397,700 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $605,700 at the beginning of the year. The actual and expected return on plan assets was $53,900. The settlement rate was 9%. No gains or losses occurred in 2017 and no benefits were paid.
4. Amortization of prior service cost was $50,500 in 2017. Amortization of net gain or loss was not required in 2017.
(a)
Determine the amounts of the components of pension expense that should be recognized by the company in 2017. (Enter amounts that reduce pension expense with either a negative sign preceding the number e.g. -45 or parenthesis e.g. (45).)
Components of Pension Expense
$
$
(b)
The parts of this question must be completed in order. This part will be available when you complete the part above.
(c)
The parts of this question must be completed in order. This part will be available when you complete the part above.