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Recognition of Benefit plans: HP financial statement disclosures in the 10K

Please review the attached questions and 10k. I need simple, two line explanations for each.

1. HP provides disclosures related to its pension plans in Note 15 (pp. 129-135). Please answer the following questions based on your reading of this footnote. With respect to only the US Defined Benefit plans and only in 2004, please answer the following questions:

a. By what dollar amount did these plans affect profit?

b. Briefly explain how a company can report net pension income (vs. pension expense) at the same time it is realizing a negative return on pension investments.

c. Provide computations to yield (approximately) the $266 million in interest cost that HP reports as a component of pension expense for its US Defined Benefit plans in 2004.

d. HP has reduced its discount rate in each of the past 2 years. Briefly explain the general effect (no dollar amounts) that this rate reduction has on its balance sheet and income statement:

1. balance sheet

2. income statement

e. What amount of cash benefits did HP pay to its retirees for its US Defined Benefit plans in 2004?

f. What amount of cash contribution did HP make to its US Defined Benefit plans in 2004?

g. Is the HP US Defined Benefit plan over-funded or under-funded and by what amount?

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Solution Summary

The solution responds to each question as requested and also includes a link to a site for better understanding about the concepts.