Question

The Unforgettable Fire Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2007 are as follows:

                                                         Future

            Employee                    Years of Service

            Adam                                      3

            Bono                                       4

            Edge                                        5

            Larry                                       6

            Joshua                                     6

On January 1, 2007, the company amended its pension plan increasing its PBO by $60,000 due to additional credit awarded for past service.

Required:

1. Compute the amount of prior service cost (PSC) amortization for the years 2007 through 2012 assuming that Unforgettable uses the years-of-service method.
2. Compute the amount of prior service cost (PSC) amortization for the years 2007 through 2012 assuming that Unforgettable uses the straight-line method.

Answer 1