Big Books, Inc. has the following information related to its defined benefit pension plan:
December 31, Year 6:
Projected benefit obligation – $1,500,000
Fair value of plan assets – 1,400,000
Unrecognized prior service cost – 200,000
Unrecognized net transition asset 60,000
December 31, Year 7:
Projected benefit obligation – $1,740,000
Fair value of plan assets- 1,670,000
Service cost 220,000
Assumptions:
Discount rate
6%
Expected return on plan assets
8%
My question is: When do you know which formula to use to compute Return to Net Assets.. in this problem you could use:
Beg FV of Plan Assets
+ Contributions
+ Actual Return on PA (squeeze)
– Benefits Paid
= Ending FV of PA
= $140,000
or you could use the Expected formula.. Beg FV of plan assets x Expected rate of return.
= $112,000
BEC - 76
REG - 76
FAR - 77
AUD - 63, 89
DONE!!
CPA 3/15
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