question archive On January 1, 2005, the Delhi Corp
On January 1, 2005, the Delhi Corp
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On January 1, 2005, the Delhi Corp. amended its defined benefit pension plan to provide in- creased retirement benefits for its 150 employees covered by the plan on that date. As a result of the plan amendment, the projected benefit obligation as of January 1, 2005, increased by$1,275,000. Management decided to amortize this amount on a straight-line basis over the aver- age remaining service life of the 150 employees. It is assumed that employees will retire at the rate of six employees per year over the next 25 years. The prior service cost is to be funded with equal annual contributions over a ten-year period. The first contribution is due at the end of 2005 and the assumed interest rate for funding purposes is 12 percent. The present value factor for an ordinary annuity for ten periods at 12 percent is 5.6502.
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- Compute the annual amount of amortization of prior service cost.
- Compute the amount of the annual contribution required to fund the prior service cost. (Round computation to the nearest dollar.)
- Assume that pension cost for 2005 excluding prior service cost amounted to $120,000 and Delhi's contributions to the pension fund totaled $110,000 in addi- tion to the funding of prior service cost.
On January 1, 2005, the Delhi Corp. amended its defined benefit pension plan to provide in- creased retirement benefits for its 150 employees covered by the plan on that date. As a result of the plan amendment, the projected benefit obligation as of January 1, 2005, increased by$1,275,000. Management decided to amortize this amount on a straight-line basis over the aver- age remaining service life of the 150 employees. It is assumed that employees will retire at the rate of six employees per year over the next 25 years. The prior service cost is to be funded with equal annual contributions over a ten-year period. The first contribution is due at the end of 2005 and the assumed interest rate for funding purposes is 12 percent. The present value factor for an ordinary annuity for ten periods at 12 percent is 5.6502.
-
- Compute the annual amount of amortization of prior service cost.
- Compute the amount of the annual contribution required to fund the prior service cost. (Round computation to the nearest dollar.)
- Assume that pension cost for 2005 excluding prior service cost amounted to $120,000 and Delhi's contributions to the pension fund totaled $110,000 in addi- tion to the funding of prior service cost.
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