Question

Blue 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		$2,420,000		$2,299,000
2020		2,904,000		3,025,000
2021		3,569,500		3,146,000
2022		4,356,000		3,630,000

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, $338,800 loss; 2020, $108,900 loss; 2021, $13,310 loss; and 2022, $30,250 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		$enter a dollar amount
2020		$enter a dollar amount
2021		$enter a dollar amount
2022		$enter a dollar amount

Answer 1

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	Projected Benefit Obligation (a)	Plan Assets	10% Corridor	Accumulated OCI (G/L) (a)	Minimum Amortization of Loss
2019	$2,420,000	$2,299,000	$242,000	$0	$0
2020	2,904,000	3,025000	302,500	338,800	3,630
2021	3,569,500	3,146,000	356,950	444,070	7,260
2022	4,356,000	3,630,000	435600	450,120	1,210

(a) As of the beginning of the year.

(b ) ($338,800– $302500) ÷ 10 years = $3,630

(c) $338,800 – $3,630+ $108900 = $444,070

(d) ($444,070– $356,950) ÷ 12 years = $7,260

(e) $444,070 – $7,260 + $13,310= $450,120

(f) ($450,120 – $435,600) ÷ 12 years = $1,210

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