Question

Splish Corp. has the following beginning-of-the-year present values for its projected benefit obligation and market-related values for its pension plan assets.

		Projected Benefit Obligation		Plan Assets Value
2019		$2,120,000		$2,014,000
2020		2,544,000		2,650,000
2021		3,127,000		2,756,000
2022		3,816,000		3,180,000

The average remaining service life per employee in 2019 and 2020 is 10 years and in 2021 and 2022 is 12 years. The net gain or loss that occurred during each year is as follows: 2019, $296,800 loss; 2020, $95,400 loss; 2021, $11,660 loss; and 2022, $26,500 gain. (In working the solution, the gains and losses must be aggregated to arrive at year-end balances.)

Using the corridor approach, compute the amount of net gain or loss amortized and charged to pension expense in each of the four years, setting up an appropriate schedule.

Year		Minimum Amortization of Loss
2019
2020
2021
2022

Answer 1

Ans: Minimum Amortization of Loss using Corridor Approach

Year	Projected Benefit Obligation	Plan Assets	10% corridor	Accumulated OCI (G/l)a	Minimum Amortization of loss
2019	2,120,000	2,014,000	212,000	0	0
2020	2,544,000	2,650,000	265,000	296,800	3,180
2021	3,127,000	2,756,000	312,700	389,020	6,375
2022	3,816,000	3,180,000	381,600	394,485	1,075

As of the beginning of the year

Amortization for 2020= 296,800-265,000)/10 years: 3,180

Accumulated for 2021= 296,800-3,180+95,400: 389,200

Amortization for 2021= (389,200-312,700)/12: 6,375

Accumulated for 2022: 389,200-6,375+ 11,660: 394,485

Amortization for 2022: 394,485-381,600)/12: 1074