Exhibit I below contains the pension plan disclosures of Norfolk Southern Railroad. Use the information contained in this exhibit to answer the following questions:
Calculate each of the following
a) Recurring pension cost
b) Gross pension cost
c) Non-smoothed pension cost.
d) Funded Status of the Plan
The recurring pension costs consists of two components:
Service cost - present value of pension benefit earned b employees, and
Interest cost - Increase in projected benefit obligtion arising when pension payment are to be made, computed by multiplying beginning period PBO by the discount rate.
In case of 2003 the sum of pension and interest cost from the problem is (20 +89) = 109. If we take the 6.25% discount factor that is 0.94344 and multiply it by 109 we get 102.83.
In case of 2002 the sum of pension and interest cost from the problem is (17 + 91) = 108. If we take the 7.25% discount factor that is 0.87044 and multiply it by 108we get 94.00.
In case of 2001 the sum of pension and interest cost from the problem is (15 +94 ) = 109. If we take the 7.50 % discount factor that is 0.8043 and multiply it by 109 we get 87.67.
If we total these three figures we get 284.51.
Please note that I have done this manually using tables, so as to explain it to you, in the exam it will be easier to do ...
This job examines financial statement analysis.
Financial Statement Analysis: business decisions using each of the statements
1. What does the income statement tell you about the company?
2. What does the balance sheet tell you about the company?
3. What does the statement of cash flow tell you about the company?
4. What business decisions could be made using each of these financial statements?
5. What information is provided in the statements that will assist you in making these business decisions? What information is not provided that could assist in managerial decision making?