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Calculate the corridor for 2008 and the amortization of the unrecognized net loss for 2008; What are the criteria that must be satisfied for a lessor to classify a lease as direct financing of sales type lease?

III-Part

1- In computing the service cost component of pension expense, the FASB concluded that.

a- The accumulated benefit obligation provides a more realistic measure of the pension obligation on a going concern basis.
b- A company should employ an actuarial funding method to report pension expense that best reflects the cost of benefits to employees.
c- The projected benefit obligation using future compensation levels provides a realistic measure of present pension obligation and expense
d- All of these.

2- Pension plan calculation:
The following information is for the pension plan for the employees of Faulk Inc.
12/31/07 12/31/08

Accumulated benefit obligation $2,800,000 $3,760,000

Project benefit Obligation 3,040,000 4,000,000

Fair Value of plan assets 3,080,000 3,520,000

Market related value of assets 2,960,000 3,440,000

Unrecognized net loss 425,000

Settlement rate 8% 8%

Expected rate of return 7% 6%

Faulk estimates that the average remaining service life is 15 years. Faulk contribution was $520,000 in 2008 an benefits paid were 280,000

Instructions:
a) Calculate the interest cost for 2008
b) Calculate the actual return on plan assets in 2008
c) Calculate the unexpected gain or loss in 2008
d) Calculate the corridor for 2008 and the amortization of the unrecognized net loss for 2008

IV-Part

2- Lease criteria by classification by lessor.
What are the criteria that must be satisfied for a lessor to classify a lease as direct financing of sales type lease?

Solution Summary

Computations and guidance provided.

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