Gretta's Emporium Corp. provides its employees with a defined benefit pension plan. The plan assets and liabilities are shown below: December 31, 20X6 December 31, 20X5 $1,371,000 $1,288,000 $1,595,000 $1,487,000 Assets – market value Liabilities – actuarial value The discount rate used in the actuarial assumptions is 3%. The plan actuary advised that the current service cost for the year was $187,200. This service cost is accrued at year end. In 20X6, the pension plan made payments totalling $50,000 to retirees. The payments were made evenly throughout the year. • A plan improvement was made at the beginning of 20X6. The improvements were backdated for all members of the plan. The actuary estimated the cost at $18,000. Gretta's Emporium Corp. did not make a payment to fund the plan improvements. On July 1, 20X6, Gretta's Emporium Corp. made a contribution of $34,000 to the defined benefit plan. On December 31, 20X6, Gretta's Emporium Corp. sold one of its subsidiaries, and as a result, a group of employees was removed from the defined benefit plan. The actuary estimated that this change reduced the total defined benefit obligation by $400,000. As compensation, at the date of transfer, the pension plan trustee transferred $250,000 of the existing plan assets to the employees' new plan.
Gretta's Emporium Corp. provides its employees with a defined benefit pension plan. The plan assets and liabilities are shown below: December 31, 20X6 December 31, 20X5 $1,371,000 $1,288,000 $1,595,000 $1,487,000 Assets – market value Liabilities – actuarial value The discount rate used in the actuarial assumptions is 3%. The plan actuary advised that the current service cost for the year was $187,200. This service cost is accrued at year end. In 20X6, the pension plan made payments totalling $50,000 to retirees. The payments were made evenly throughout the year. • A plan improvement was made at the beginning of 20X6. The improvements were backdated for all members of the plan. The actuary estimated the cost at $18,000. Gretta's Emporium Corp. did not make a payment to fund the plan improvements. On July 1, 20X6, Gretta's Emporium Corp. made a contribution of $34,000 to the defined benefit plan. On December 31, 20X6, Gretta's Emporium Corp. sold one of its subsidiaries, and as a result, a group of employees was removed from the defined benefit plan. The actuary estimated that this change reduced the total defined benefit obligation by $400,000. As compensation, at the date of transfer, the pension plan trustee transferred $250,000 of the existing plan assets to the employees' new plan.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter19: Accounting For Post Retirement Benefits
Section: Chapter Questions
Problem 6E
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