Reference no: EM132586458

BUSI 3423 Intermediate Accounting - Yorkville University

Question 1:

GNC Corporation includes the following information regarding their defined benefit pension plan (calculated in hundreds of thousands of dollars) for 2018:

Actual return on plan assets	$ 9
Contributions from employer	20
Benefits paid to retirees	10
Actuarial loss due to change in actuarial assumptions	15
Current service cost	19
Opening balance, DBO	100
Opening balance, plan assets	100

At the end of the year, GNC Corporation revised the terms of its pension plan, which resulted in past service costs of $35.

Required:
1. Assuming that GNC applies an 11% interest cost and follows IFRS, determine the company's 2018 pension expense and the effect of the pension plan on the company's shareholders' equity.

Question 2:

Uncharted Corp. reports the following information (information provided in hundreds of thousands of dollars) to you about its defined benefit pension plan for 2018:

Actual return on plan assets	$17
Benefits paid to retirees	12
Contributions from employer	30
Cost of plan amendment in year	20
Current service cost	32
Interest cost	14
Opening balance, defined benefit obligation (DBO)	138
Opening balance, plan assets	150

Required:
1) Provide the defined benefit obligation ending balance.
2) Provide a continuity schedule for the plan assets for the year. Is the plan in a surplus or a deficit position at the end of the year?

Question 3:

Bat Flip Limited provides a defined contribution pension plan option for all of their full-time employees. When an employee opts into the plan, the plan requires the company to deduct 5% of each employee's gross pay for each payroll period as the employee contribution. The company then contributes 7% of the gross pay for the employer contribution. Both amounts are remitted to the pension trustee within 10 days of the end of each month for the previous month's payrolls. At November 30, 2018, Bat Flip reported $29,300 of combined withheld and matched contributions owing to the trustee. During December, Bat Flip reported gross salaries and wages expense of $276,100.

Required:
1) Prepare the entry to record the December payment to the plan trustee.
2) What amount of pension expense will the company report for December 2018?
3) Determine the appropriate pension account and its balance to be reported on the December 31, 2018 statement of financial position.

Question 4:

Tata Steel Corporation has provided the following information regarding their defined benefit pension plan for the year 2018:

Current service cost	$ 235,000
Contribution to the plan	262,500
Past service cost, effective December 31, 2018	50,000
Actual return on plan assets	160,000
Benefits paid	100,000
Net defined benefit liability at January 1, 2018	400,000
Plan assets at January 1, 2018	1,600,000
Defined benefit obligation at January 1, 2018	2,000,000
Interest/discount rate on the DBO and plan assets	10%

In addition, Tata Steel follows IFRS. Required:
1) Prepare a continuity schedule for 2018 for the defined benefit obligation.
2) Prepare a continuity schedule for 2018 for the plan assets.
3) Calculate pension expense for the year 2018.
4) Prepare all pension journal entries recorded by Tata Steel in 2018.
What pension amount will appear on Tata Steel's statement of financial position at
December 31, 2018?

Question 5:

MedPlus Ltd. initiated a one-person pension plan in January 2012 that promises the employee a pension on retirement according to the following formula: pension benefit = 2.5% of final salary per year of service after the plan initiation. The employee began employment with MedPlus early in 2009 at age 33, and expects to retire at the end of 2035, the year in which he turns 60. His life expectancy at that time is 21 years. Assume that this employee earned an annual salary of $40,000 when he joined MedPlus, that his salary was expected to increase at a rate of 4% per year, and that this remains a reasonable assumption to date. MedPlus considers a discount rate of 6% to be appropriate.

Required:

1) What is the employee's expected final salary?

2) What amount of current service cost should MedPlus recognize in 2017 relative to this plan?

3) What is the amount of the accrued benefit obligation at December 31, 2017?