Question

Herring Wholesale Company has a defined benefit pension plan. On January 1, 2021, the following pension related data were available:

	($ in thousands)
Net gain–AOCI	$350
Accumulated benefit obligation	3,170
Projected benefit obligation	3,200
Fair value of plan assets	2,700
Average remaining service period of active employees (expected to remain constant for the next several years)	15	years

The rate of return on plan assets during 2021 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 $43,000 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 2021.
2. Assume the net pension expense for 2021, not including the amortization of the net gain component, is $345,000. What is pension expense for the year?
3. Determine the net loss—AOCI or net gain—AOCI as of January 1, 2022.

(For all requirements, enter your answers in thousands (i.e. 200,000 should be entered as 200).)

			($ in thousands)
1.	Amount amortized to 2021 pension expense
2.	Pension expense
3.	Net gain	—AOCI, end of 2021 (beg. of 2022)

Answer 1

1)

Particular	Amount ( $ in 000s)
Cumulative net Loss ( gain)- begining balance (a)	$350
Projected benefit obligation - Begining balance	$3,200
Plan assets- begining balance	$2,700
Corridor = 10% of biggest of PBO and plan assets(b)	$320
Excess net loss( gain) (b-a)	($30)
Remaining service life	15 years
Amortized net loss(gain)	($2)

2) The pension expense will be:

Particular	Amount($000s)
Pension epense before amortization	$345
Amortization of net loss ( gain)	($2)
Pension expense for the year	$343

3)

Particular	Amount($000s)
Cumulative net loss(gain)- Begining balance	($350)
Amorized net loss (gain) - 2021	($2)
Decrease in PBO due to changes in assumptions	($43)
Difference between actual and expected return on plan assets($2,700 * 0.01)	$27
Cumulative net loss ( gain ) -jan 1, 2022	$368