Exercise NO: 17

Keeton Company sponsors a defined benefit pension plan for its 600 employees. The company’s actuary provided the following information about the plan.

Keeton Company sponsors a defined benefit pension plan for its 600 employees. The company’s actuary provided the following information about the plan.

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January 1, December 31,

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2014 2014 2015

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Projected benefi t obligation $2,800,000 $3,650,000 $4,195,000

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Accumulated benefi t obligation 1,900,000 2,430,000 2,900,000

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Plan assets (fair value and market-related asset value) 1,700,000 2,900,000 3,790,000

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Accumulated net (gain) or loss (for purposes of the corridor calculation) –0– 198,000 (24,000)

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Discount rate (current settlement rate) 9% 8%

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Actual and expected asset return rate 10% 10%

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Contributions 1,030,000 600,000

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The average remaining service life per employee is 10.5 years. The service cost component of net periodic pension expense for employee services rendered amounted to $400,000 in 2014 and $475,000 in 2015. The accumulated OCI (PSC) on January 1, 2014, was $1,260,000. No benefits have been paid.

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Instructions

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(Round to the nearest dollar.)

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(a) Compute the amount of accumulated OCI (PSC) to be amortized as a component of net periodic pension expense for each of the years 2014 and 2015.

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(b) Prepare a schedule which reflects the amount of accumulated OCI (G/L) to be amortized as a component of pension expense for 2014 and 2015.

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(c) Determine the total amount of pension expense to be recognized by Keeton Company in 2014 and 2015.

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