Respuesta :
Answer:
a.
December 31, 2021
PBO = $180,000
December 31, 2022
PBO = $419,000
b.
December 31, 2021
Plan Assets = $190,000
December 31, 2022
Plan Assets = $409,000
c.
December 31, 2021
Pension Expense = $180,000
December 31, 2022
Pension Expense = $220,000
Explanation:
a. Calculating Projected Benefits Obligation (PBO)
The PBO is current requirement of pension plan to cover the future obligations to its employees.
This is calculated as follows;
December 31, 2021
Balance on January 1: $0
Service Cost: $180,000
Interest Cost: $0
Benefits Paid: $0
PBO = Balance + Service Cost + Interest Cost - Benefits Paid
PBO = $0 + $180,000 + $0 - $0
PBO = $180,000
December 31, 2022
Balance on January 1: $180,000
Service Cost: $230,000
Interest Cost: $9,000 (5% of $180,000)
Benefits Paid: $0
PBO = Balance + Service Cost + Interest Cost - Benefits Paid
PBO = $180,000 + $230,000 + $9,000 - $0
PBO = $419,000
b. Calculating Plan Assets
Plan assets are assets of funded defined benefit plan. Such assets are managed by pension fund manager
This is calculated as follows;
December 31, 2021
Balance on January 1: $0
Actual Return on Plan: $0 (10% * $0)
Contribution Made: $190,000
Benefits Paid: $0
Plan Assets = Balance + Actual Return + Contribution Made - Benefits
Plan Assets = $0 + $0 + $190,000 - $0
Plan Assets = $190,000
December 31, 2022
Balance on January 1: $190,000
Actual Return on Plan: $19,000 (10% * $190,000)
Contribution Made: $200,000
Benefits Paid: $0
Plan Assets = Balance + Actual Return + Contribution Made - Benefits
Plan Assets = $190,000 + $19,000 + $200,000 - $0
Plan Assets = $409,000
c. Calculating Pension Expense
It is amount reported in income statement related to company's pension plan. It is expenses in relation to liabilities towards pension payable to employees
December 31, 2021
Service Cost: $180,000
Interest Cost: $0 (5% * $0)
Expected Return: $0 (10% * $0)
Pension Expense = Service Cost + Interest Cost - Expected Return
Pension Expense = $180,000 + $0 - $0
Pension Expense = $180,000
December 31, 2022
Service Cost: $230,000
Interest Cost: $9,000 (5% of $180,000)
Expected Return: $19,000 (10% * $190,000)
Pension Expense = Service Cost + Interest Cost - Expected Return
Pension Expense = $230,000 + $9,000 - $19,000
Pension Expense = $220,000
The calculation for each of the following amount as of both December 31, 2021 and December 31, 2022 are:
a. December 31, 2021
- PBO = $180,000
December 31, 2022
- PBO = $419,000
b. December 31, 2021
- Plan Assets = $190,000
December 31, 2022
- Plan Assets = $409,000
c. December 31, 2021
- Pension Expense = $180,000
December 31, 2022
- Pension Expense = $220,000
The Calculation and their Parameters
a. Calculating Projected Benefits Obligation (PBO
December 31, 2021
- Balance on January 1: $
- Service Cost: $180,000
- Interest Cost: $0
- Benefits Paid: $0
PBO = Balance + Service Cost + Interest Cost - Benefits Paid
Which is then
PBO = $0 + $180,000 + $0 - $0
PBO = $180,000
December 31, 2022
- Balance on January 1: $180,000
- Service Cost: $230,000
- Interest Cost: $9,000 (5% of $180,000)
- Benefits Paid: $0
PBO = Balance + Service Cost + Interest Cost - Benefits Paid
Which is then,
PBO = $180,000 + $230,000 + $9,000 - $0
PBO = $419,000
b. Calculating Plan Assets
December 31, 2021
- Balance on January 1: $0
- Actual Return on Plan: $0 (10% * $0)
- Contribution Made: $190,000
- Benefits Paid: $0
Plan Assets = Balance + Actual Return + Contribution Made - Benefits
Plan Assets = $0 + $0 + $190,000 - $0
Plan Assets = $190,000
December 31, 2022
- Balance on January 1: $190,000
- Actual Return on Plan: $19,000 (10% * $190,000)
- Contribution Made: $200,000
- Benefits Paid: $0
Plan Assets = Balance + Actual Return + Contribution Made - Benefits
With this,
Plan Assets = $190,000 + $19,000 + $200,000 - $0
Plan Assets = $409,000
c. Calculating Pension Expense
December 31, 2021
- Service Cost: $180,000
- Interest Cost: $0 (5% * $0)
- Expected Return: $0 (10% * $0)
Pension Expense = Service Cost + Interest Cost - Expected Return
With this,
Pension Expense = $180,000 + $0 - $0
Pension Expense = $180,000
December 31, 2022
- Service Cost: $230,000
- Interest Cost: $9,000 (5% of $180,000)
- Expected Return: $19,000 (10% * $190,000)
Pension Expense = Service Cost + Interest Cost - Expected Return
Pension Expense = $230,000 + $9,000 - $19,000
Pension Expense = $220,000
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