Part I-Theories

1. C
2. C
3. D
4. D
5. B

Part II-Comprehensive Problem

(1) FVPA-Jan 1 6,000,000

Contribution 1,000,000
Actual Return 900,000
FVPA- Dec 31 7,900,000

(2) PBO- Jan 1 5,000,000

Current Service Cost 700,000
Past service cost 200,000
Int exp (10% x 5M) 500,000
Dec in PBO -actuarial gain (500,000)
PBO- Dec 31 5,900,000

(3) FVPA-Dec 31 7,900,000

PBO-Dec 31 5,900,000
Prepaid/accrued benefit cost-surplus 2,000,000
Asset Ceiling- December 31, 2019 1,200,000
Effect of Asset Ceiling 800,000

(4) Current service cost 700,000

Past service cost 200,000
Int exp on PBO (10% x 5M) 500,000
Int inc on FVPA (10% x 6M) (600,000)
Int exp on effect of asset ceiling (10% x 300,000) 30,000
Employee benefit expense 830,000

(5) Actual return 900,000

Interest income 600,000
Remeasurement gain on plan assets 300,000

Decrease in PBO- actuarial gain 500,000

Effect of asset ceiling - Dec 31 800,000

Effect of asset ceiling - Jan 1 300,000
 Total change in the effect of asset ceiling 500,000
Interest expense on effect of asset ceiling (10% x 300k) (30,000)
Remeasurement loss on the effect of asset ceiling 470,000

Remeasurement gain on plan asset 300,000

Actuarial gain on PBO 500,000
Remeasurement loss- asset ceiling (470,000)
Net remeasurement gain 330,000

(6) Employee benefit expense 830,000

Prepaid/accrued benefit cost 500,000
Cash 1,000,000
Remeasurement gain-OCI 330,000

(7) P/ABC - Jan 1, asset ceiling -debit 700,000

Debit adjustment 500,000
P/ABC - Dec 31, asset ceiling- debit 1,200,000

Part III- Problem Solving

Problem A

(1) PBO-Jan 1 6,700,000

Interest expense (6,700,000 x 10%) 670,000
Actuarial loss due to increase in PBO 150,000
Current service cost 280,000 squeezed
Benefits paid (600,000)
PBO- Dec 31 7,200,000

(2) FV of plan assets, Jan 1 6,500,000

Employer contribution 300,000
Actual return 700,000 *
Benefits paid (600,000)
FV of plan assets, Dec 31 6,900,000

(3) Actual Return 700,000

FV of plan assets, Jan 1 (6.5m x 10%) 650,000
Remeasurement gain 50,000
Problem B
(4) Current service cost 90,000
Interest exp (1m x 10%) 100,000
Past service cost 30,000
Int income (950k x 10% ) (95,000)
Employee benefit expense 125,000
Net remeasurement loss 2019 15,000
Defined benefit cost 140,000

Problem C
(5) Current service cost 700,000
PBO beg interest exp (3,750,000 x 10%) 375,000
Interest income (3,500,000 x 10%) (350,000)
Settlement gain (50,000)
Employee benefit expense 675,000

(6) Actual return 420,000

Interest income 350,000
Remeasurement gain 70,000
Dec in PBO 100,000
Net remeasurement gain 170,000

Problem D
(7) PBO Jan 1 5,200,000
Current service cost 800,000 *
Interest exp (5.2m x 12%) 624,000
Remeasurement loss on obligation 36,000
Benefits paid (740,000)
PBO Dec 31 5,920,000

Current service cost 800,000

Interest exp 624,000
Interest income (5m x 12%) (600,000)
Employee benefit expense 824,000

Problem E
(8) FVPA Jan 1 7,552,500
PBO Jan 1 6,900,000
P/ABC 652,500
Asset Ceiling 300,000
Effect of Asset Ceiling 352,500

PBO Jan 1 6,900,000

Interest exp (6.9 m x 10%) 690,000
 Current service cost 788,500 *
Benefits paid (585,000)
PBO Dec 31 7,793,500

Current service cost 788,500

Interest exp 690,000
Interest income (7,552,000 x 10%) (755,250)
Interest expense on effect of asset ceiling (352,500 x 10% ) 35,250
Employee benefit expense 758,500

Problem F

(9) FVPA beg 7,000,000

Return on assets 500,000
Settlement price of PBO settled (600,000)
Benefits paid (400,000)
Contribution 1,500,000
FVPA ending 8,000,000

Return on plan assets 500,000

Interest income (7m x 10% ) 700,000
Remeasurement loss on plan assets (200,000) OCI-debited

Remeasurement loss on plan assets 200,000

(50
Actuarial gain due to dec in PBO ,000)
Net remeasurement loss 150,000 OCI debited

Problem G

(10) Current service cost 520,000

Interest expense on PBO 590,000
Past service cost 360,000
1,470,000
Problem H

(11) Future salary (500,000 x 1.217) 608,500

 Annual pension payment (3% x 608,500 x 15) 273,825 x 6
Multiply by PV of an OA of 1 at 12% for 6 periods 4.111
PV-December 31, 2024 1,125,695 or 273,825 x 6
Multiply by PV of 1 at 12% for 5 periods 0.567
PBO-December 31, 2019 638,269

Problem I

(12) Annual pension or benefit (1,440,000 x 10%) 144,000 or 432,000 for three years

(13)
(a) (b) (axb)
PV
Benefit factor PV
130,60
2019 144,000 0.9070 8
137,14
2020 144,000 0.9524 6
144,00
2021 144,000 1.0000 0
411,75
432,000 4

Int
Current Cost(5%
Date SC ) PV

12/31/201 130,60
9 130,608 8
12/31/202 274,28
0 137,146 6,530 4
12/31/202 432,00
1 144,000 13,716 0