Closure Activities Postemployment Benefits and other Benefits- Answer Key PDF

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Part I-Theories 1. C 2. C 3. D 4. D 5. B Part II-Comprehensive Problem (1)

FVPA-Jan 1 Contribution Actual Return FVPA- Dec 31

6,000,000 1,000,000 900,000 7,900,000

(2)

PBO- Jan 1 Current Service Cost Past service cost Int exp (10% x 5M) Dec in PBO -actuarial gain PBO- Dec 31

5,000,000 700,000 200,000 500,000 (500,000) 5,900,000

(3)

FVPA-Dec 31 PBO-Dec 31 Prepaid/accrued benefit cost-surplus Asset Ceiling- December 31, 2019 Effect of Asset Ceiling

7,900,000 5,900,000 2,000,000 1,200,000 800,000

(4)

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

700,000 200,000 500,000 (600,000) 30,000 830,000

(5)

Actual return Interest income Remeasurement gain on plan assets

900,000 600,000 300,000

Decrease in PBO- actuarial gain

500,000

Effect of asset ceiling - Dec 31 Effect of asset ceiling - Jan 1

800,000 300,000

Total change in the effect of asset ceiling Interest expense on effect of asset ceiling (10% x 300k) Remeasurement loss on the effect of asset ceiling

500,000 (30,000) 470,000

Remeasurement gain on plan asset Actuarial gain on PBO Remeasurement loss- asset ceiling Net remeasurement gain

(6)

(7)

Employee benefit expense Prepaid/accrued benefit cost Cash Remeasurement gain-OCI

P/ABC - Jan 1, asset ceiling -debit Debit adjustment P/ABC - Dec 31, asset ceiling- debit

300,000 500,000 (470,000) 330,000

830,000 500,000 1,000,000 330,000

700,000 500,000 1,200,000

Part III- Problem Solving Problem A (1)

(2)

(3)

PBO-Jan 1 Interest expense (6,700,000 x 10%) Actuarial loss due to increase in PBO Current service cost Benefits paid PBO- Dec 31

6,700,000 670,000 150,000 280,000 (600,000) 7,200,000

FV of plan assets, Jan 1 Employer contribution Actual return Benefits paid FV of plan assets, Dec 31

6,500,000 300,000 700,000 (600,000) 6,900,000

Actual Return FV of plan assets, Jan 1 (6.5m x 10%) Remeasurement gain

700,000 650,000 50,000

squeezed

*

Problem B

(4)

(5)

(6)

(7)

(8)

Current service cost Interest exp (1m x 10%) Past service cost Int income (950k x 10% ) Employee benefit expense Net remeasurement loss 2019 Defined benefit cost Problem C Current service cost PBO beg interest exp (3,750,000 x 10%) Interest income (3,500,000 x 10%) Settlement gain Employee benefit expense Actual return Interest income Remeasurement gain Dec in PBO Net remeasurement gain

90,000 100,000 30,000 (95,000) 125,000 15,000 140,000

700,000 375,000 (350,000) (50,000) 675,000 420,000 350,000 70,000 100,000 170,000

Problem D PBO Jan 1 Current service cost Interest exp (5.2m x 12%) Remeasurement loss on obligation Benefits paid PBO Dec 31

5,200,000 800,000 * 624,000 36,000 (740,000) 5,920,000

Current service cost Interest exp Interest income (5m x 12%) Employee benefit expense

800,000 624,000 (600,000) 824,000

Problem E FVPA Jan 1 PBO Jan 1 P/ABC Asset Ceiling Effect of Asset Ceiling

7,552,500 6,900,000 652,500 300,000 352,500

PBO Jan 1 Interest exp (6.9 m x 10%)

6,900,000 690,000

Current service cost Benefits paid PBO Dec 31

788,500 * (585,000) 7,793,500

Current service cost Interest exp Interest income (7,552,000 x 10%) Interest expense on effect of asset ceiling (352,500 x 10% ) Employee benefit expense

788,500 690,000 (755,250) 35,250 758,500

Problem F (9)

FVPA beg Return on assets

7,000,000 500,000

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)

Remeasurement loss on plan assets Actuarial gain due to dec in PBO

200,000 (50 ,000)

Net remeasurement loss

150,000

Problem G (10)

Current service cost

520,000

Interest expense on PBO

590,000

Past service cost

360,000 1,470,000

OCI-debited

OCI debited...