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Pension Calculations

Selected information about the pension plan of ABC Co. is as follows:

12/31/07 12/31/08
---------- ----------
Accumulated benefit Oligation $4,700,000 - $4,930,000
Projected benefit oligation 4,800,000 - 5,020,000
Accumlated OCI (PSC) 1,800,000 - 1,600,000
Fair value of plan assets 4,650,000 - 4,800,000
Pension expense 1,000,000 - 1,620,000
Contribution 985,000 - 1,350,000
Discount rate (for year) 9% 8%

Instructions:

a) What is the corridor for 2008?
b) Calculate the pension asset/liability at December 31,2008
c) prepare entries for 2008 to record the pension expense and contribution.

Solution Preview

a. The corridor is the larger of 10% of beginning balance of projected benefit obligation or 10% of market value of plan assets (this can be taken as the fair value of plan assets). The beginning balance is the ending balance of 2007.
10% of projected benefit obligation = ...

Solution Summary

The solution explains how to determine the corridor, pension asset/liability and pass the related journal entries

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