question archive Using the information below, compute the gain or loss component of net periodic pension cost and indicate whether the amount is added or deducted in determining pension cost for the period
Using the information below, compute the gain or loss component of net periodic pension cost and indicate whether the amount is added or deducted in determining pension cost for the period
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Using the information below, compute the gain or loss component of net periodic pension cost and indicate whether the amount is added or deducted in determining pension cost for the period.
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Actual return on plan assets ........................... |
$450,000 |
|
Expected return on plan assets ......................... |
570,000 |
|
Unrecognized gain from prior years ..................... |
240,000 |
|
Corridor amount ........................................ |
150,000 |
|
Average service life for amortization purposes ......... |
8 |
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ANS: |
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Deferred loss for current year ($450,000 - $570,000) ... |
$120,000 |
|
Amortization of unrecognized gain from prior years ..... [($240,000 - $150,000)/8 years] ...................... |
11,250 |
|
Gain or loss component ................................. |
$131,250 |
Both the deferred loss ($120,000) and the gain amortization ($11,250) have the effect of reducing pension cost. Thus these amounts are combined and deducted (offset against other components) in computing pension cost for the current period.
