Sachs Brands' defined benefit pension plan specifies annual
retirement benefits equal to: 1.6% × service years × final year's
salary, payable at the end of each year. Angela Davenport was hired
by Sachs at the beginning of 2004 and is expected to retire at the
end of 2038 after 35 years' service. Her retirement is expected to
span 18 years. Davenport's salary is $90,000 at the end of 2018 and
the company's actuary projects her salary to be $240,000 at
retirement. The actuary's discount rate is 7%. (FV of $1, PV of $1,
FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
At the beginning of 2019, the pension formula was amended
to:
1.75% × Service years × Final year's salary
The amendment was made retroactive to apply the increased benefits
to prior service years.
Required:
1. What is the company's prior service cost at the
beginning of 2019 with respect to Davenport after the amendment
described above?
2. Since the amendment occurred at the beginning
of 2019, amortization of the prior service cost begins in 2019.
What is the prior service cost amortization that would be included
in pension expense?
3. What is the service cost for 2019 with respect
to Davenport?
4. What is the interest cost for 2019 with respect
to Davenport?
5. Calculate pension expense for 2019 with respect
to Davenport, assuming plan assets attributable to her of $150,000
and a rate of return (actual and expected) of 10%.
(For all requirements, do not round intermediate
calculations. Round your final answers to nearest whole
dollar.)
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