Problem 17-7 Determining the amortization of net gain [LO17-6] Herring Wholesale

Question

Problem 17-7 Determining the amortization of net gain [LO17-6]

Herring Wholesale Company has a defined benefit pension plan. On January 1, 2018, the following pension related data were available:

The rate of return on plan assets during 2018 was 9%, although it was expected to be 10%. The actuary revised assumptions regarding the PBO at the end of the year, resulting in a $30,000 decrease in the estimate of that obligation.

Required:

1. Calculate any amortization of the net gain that should be included as a component of net pension expense for 2018.
2. Assume the net pension expense for 2018, not including the amortization of the net gain component, is $332,000. What is pension expense for the year?
3. Determine the net loss—AOCI or net gain—AOCI as of January 1, 2019.

($ in 000s) Net gain–AOCI $270 Accumulated benefit obligation 1,870 Projected benefit obligation 1,900 Fair value of plan assets 1,800 Average remaining service period of active employees
(expected to remain constant for the next several years) 16 years

Explanation / Answer

1. Solution :-

2 Solution :-

3 Solution :-

Particulars Amount ($ in 000's) Net gain (previous gains exceeded previous losses) (A) $270 10% of $1900 ($1900 is greater than 1800) (B) $190 Excess at the beginning of the year (A - B) $80 Average remaining service period in years 16 years Amunt amortized to 2018 pension expense $5

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