question archive The following information relates to the defined benefit pension plan of the Ruder Co
The following information relates to the defined benefit pension plan of the Ruder Co
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The following information relates to the defined benefit pension plan of the Ruder Co.:
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Projected benefit obligation, January 1, 2005 ......... |
$280,000 |
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Projected benefit obligation, December 31, 2005 ....... |
307,500 |
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Accumulated benefit obligation, January 1, 2005 ....... |
240,000 |
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Accumulated benefit obligation, December 31, 2005 ..... |
256,000 |
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Benefits paid to retirees during 2005 ................. |
22,000 |
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Contributions by employer during 2005 ................. |
37,500 |
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Settlement rate ....................................... |
10% |
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(1) Compute the amount of service cost for 2005. |
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(2) Prepare the reconciliation between the beginning and ending balances for the |
pro- |
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jected benefit obligation disclosure as required by GAAP. |
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ANS: |
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(1) Projected benefit obligation, December 31, 2005 ....... |
$307,500 |
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Projected benefit obligation, January 1, 2005 ......... |
280,000 |
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Increase in projected benefit obligation .............. |
$ 27,500 |
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Less interest cost ($280,000 x 10%) ................... |
(28,000) |
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Plus benefits paid to retirees ........................ |
22,000 |
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Service cost--2005 .................................... |
$ 21,500 |
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(2) Projected benefit obligation, January 1, 2005 ......... |
$280,000 |
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Service cost .......................................... |
21,500 |
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Interest cost ......................................... |
28,000 |
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Benefits paid ......................................... |
(22,000) |
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Projected benefit obligation, December 31, 2005 ....... |
$307,500 |
