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Calculate the unexpected gain or loss

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Question - The following year-end information is for the pension plan for the employees of Ortiz Motors, Inc.

                                                           12/31/11              12/31/12

Accumulated benefit obligation              $2,800,000           $3,760,000

Projected benefit obligation                     3,040,000             4,000,000

Fair value of plan assets                         3,080,000              3,520,000

AOCI - Net (gain) or loss                         (425,000)              (480,000)

Actual return on plan assets in 2012:                      $200,000

Actuary's discount rate                                  8%                         8%

Expected rate of return on assets                   7%                         6%

Ortiz estimates that the average remaining service life is 15 years. Ortiz Motor's contribution to the pension fund was $520,000 in 2012 and benefits paid to retirees that year were $280,000.

(i) Calculate the interest cost for 2012.

(ii) Calculate the unexpected gain or loss in 2012.

(iii) Calculate the amortization of the net gain for 2012 using the corridor method.

Reference no: EM131877544

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