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Accounting
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13 Dec 2019

The fair value of pension plan assets is used to determine the corridor and to calculate the expected return on plan assets.

Expected Return

Corridor on Plan Assets

a. Yes Yes

b. Yes No

c. No Yes

d. No No

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Beverley SmithLv2
17 Dec 2019
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Related questions

4. The assets and liabilities of the pension plan itself areincluded in the financial statements of the plan:
a) administrator.
b) beneficiary.
c) sponsor.
d) trustee.

9. To compute amortization on the cumulative unrecognized gains andlosses in a pension plan, the corridor is computed as 10% ofthe:
a) average of the beginning balances of the plan assets and theprojected benefit obligation.
b) greater of the beginning balances of the plan assets or theprojected benefit obligation.
c) greater of the beginning market-related value of the plan assetsor the projected benefit obligation.
d) lesser of the beginning market-related value of the plan assetsor the projected benefit obligation.

10. The current year amortization amount of accumulatedunrecognized losses in a pension plan will:
a) decrease the pension expense.
b) have no effect on pension expense.
c) increase the pension expense.
d) never be accounted for and reported.

San Francisco Company sponsors a single-employer IRS qualified defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation. Among the components that should be included in the net pension cost recognized for a period are service cost, interest cost, and expected return on plan assets.

Required:

What is a qualified pension plan? How does it differ from a non-qualified plan?

What types of assumptions must a company make when accounting for a defined benefit pension plan? Are assumptions also needed when accounting for a defined contributions plan? Explain.

Explain how San Fran should determine the service cost component of the net pension cost.

Explain how San Fran should determine the interest cost component of the net pension cost.

Explain how San Fran should determine the unexpected return on plan assets component of the net pension cost.

Explain the corridor method of accounting for gains and losses.

San Francisco Company sponsors a single-employer IRS qualified defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation. Among the components that should be included in the net pension cost recognized for a period are service cost, interest cost, and expected return on plan assets. Required: What is a qualified pension plan? How does it differ from a non-qualified plan? What types of assumptions must a company make when accounting for a defined benefit pension plan? Are assumptions also needed when accounting for a defined contributions plan? Explain. Explain how San Fran should determine the service cost component of the net pension cost. Explain how San Fran should determine the interest cost component of the net pension cost. Explain how San Fran should determine the unexpected return on plan assets component of the net pension cost. Explain the corridor method of accounting for gains and losses.

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