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DISCUSION QUESTIONS
MF Global”
Please respond to the following:
· Analyze and explain the weaknesses within MF Global and how it led to this crisis. Make a recommendation as to how organizational failures may be minimized in the future.
“Asset Impairment”
Please respond to the following:
· Identify and discuss some of the conditions that may lead to an impairment of long-lived assets. How could these conditions relate to the impairment of Marriott’s time-shares? Explain your response.
“Banks and Pension Funds” Please respond to the following:
· Analyze and explain how you think big banks are (or are not) ripping off pension funds. Support your response with evidence and examples. Assume that you have client with an underfunded pension fund. What strategies would you recommend to close the gap in the pension fund?
“Pensions and Postretirement
Benefits
” Please respond to the following:
· Speculate why AT&T, Honeywell, and Verizon are changing the method for accounting for pension gains and losses.
Then, speculate why these companies waited two years after the losses to make the change.
|
(a) Your answer is correct. Determine the amounts of the components of pension expense that should be recognized by the company in 2012. Components of Pension Expense $ Interest on projected benefit obligation = (10% x $1,421,300) = $142,130 Expected return on plan assets = (10% x $885,100) = ($88,510) |
(b)
Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2012.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
(To record pension expense and employer’s contribution)
Ferreri Company
Pension Worksheet
General Journal Entries
Memo Record
Items
Annual Pension
Expense
Cash
OCI—Prior
Service Cost
OCI— Gain/
Loss
Pension Asset/
Liability
Projected Benefit
Obligation
Plan
Assets
Balance, Jan. 1, 2012
536,200
Cr.
1,421,300
Cr.
885,100
Dr.
Service cost
79,900
Dr.
79,900
Cr.
Interest cost
*
142,130
Dr.
142,130
Cr.
Actual return
**
88,510
Cr.
88,510
Dr.
Amortization of PSC
120,360
Dr.
120,360
Cr.
Liability gain
192,130
Cr.
192,130
Dr.
Contributions
306,800
Cr.
306,800
Dr.
Journal entry for 2012
253,880
Dr.
306,800
Cr.
120,360
Cr.
192,130
Cr.
365,410
Dr.
Accumulated OCI, Dec. 31, 2011
1,203,600
Dr.
0
Balance, Dec. 31, 2012
1,083,240
Dr.
192,130
Cr.
170,790
Cr.
1,451,200
Cr.
1,280,410
Dr.
*$1,421,300x 10%.
**Note: We show actual return on the worksheet to ensure that plan assets are properly reported. If expected and actual returns differ, then an additional adjustment is made to compute the proper amount of pension expense.
|
Gordon Company sponsors a defined benefit pension plan. The following information related to the pension plan is available for 2012 and 2013. 2012 2013 Plan assets (fair value), December 31 $1,407,786 $1,709,886 Projected benefit obligation, January 1 1,409,800 1,611,200 Pension asset/liability, January 1 281,960 Cr. ? Prior service cost, January 1 503,500 483,360 Service cost 120,840 181,260 |
Actual and expected return on plan assets |
Contributions (funding) |
8 | % |
|
(a) Your answer is correct. Compute pension expense for 2012 and 2013. Pension expense for 2012 $ Pension expense for 2013 $ 2012 2013 Service cost $120,840 $ 181,260 Interest cost ($1,409,800 x8%) and ($1,611,200 x8%) 112,784 128,896 Expected return on plan assets (48,336 ) (60,420 ) Amortization of prior service cost 20,140 24,168 Pension expense $205,428 $273,904 Click here if you would like to Show Work for this question Show List of Accounts Show Solution Show Answer Link to Text Attempts: 1 of 3 used |
| Interest cost | Actual return |
The following facts apply to the pension plan of Boudreau Inc. for the year 2012.
|
Plan assets, January 1, 2012 |
$ 490,400 |
|
Projected benefit obligation, January 1, 2012 |
490,400 |
|
Settlement rate |
|
|
42,360 |
|
|
25,320 |
|
|
48,040 |
|
|
Benefits paid to retirees |
33,690 |
Using the preceding data, compute pension expense for the year 2012. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2012 and the year-end balances in the related pension accounts.
|
BOUDREAU INC. |
|
Balance, January 1, 2012 |
| Benefits |
|
Journal entry, December 31 |
|
Balance, December 31, 2012 |
Interest cost = $490,400 x 0.08 = $39,232
Note: We show actual return on the worksheet to ensure that plan assets are properly reported. If expected and actual return differ, then an additional adjustment is made to compute the proper amount of pension expense.
Service Cost
79900
09649515_0_433
Interest on Projected Benefit Obligation
142130
09649515_0_433
Expected Return on Plan Assets
(88510)
09649515_0_433
Amortization of Prior Service Cost
120360
253880
205428
273904
09649515_0_433
