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Question: What is net interest? Identify the elements of net interest and explain how they are computed.

What is a private pension plan? How does a contributory pension plan differ from a noncontributory plan?

Linda Berstler Company sponsors a defined benefit pension plan. The corporation鈥檚 actuary provides the following information about the plan.

January 1, 2017 December 31, 2017

Defined benefit obligations \(2,500 \)3,300

Plan assets (fair value) 1,700 2,620

Discount rate 10%

Pension asset/liability 800 ?

Service cost for the year 2017 400

Contributions (funding in 2017) 700

Benefits paid in 2017 200

Instructions

(a) Compute the actual return on the plan assets in 2017.

(b) Compute the amount of other comprehensive income (G/L) as of December 31, 2017. (Assume the January 1, 2017, balance was zero.)

A headline in the Wall Street Journal stated, 鈥淔irms Increasingly Tap Their Pension Funds to Use Excess Assets.鈥� What is the accounting issue related to the use of these 鈥渆xcess assets鈥� through plan terminations?

Villa Company has experienced tough competition, leading it to seek concessions from its employees in the company鈥檚 pension plan. In exchange for promises to avoid layoffs and wage cuts, the employees agreed to receive lower pension benefits in the future. As a result, Villa amended its pension plan on January 1, 2017, and recorded negative past service cost of \(125,000. Current service cost for 2017 is \)26,000. Interest expense is \(9,000, and interest revenue is \)2,500. Actual return on assets in 2017 is $1,500. Compute Villa鈥檚 pension expense in 2017.

Tevez Company experienced an actuarial loss of \(750 in its defined benefit plan in 2017. For 2017, Tevez鈥檚 revenues are \)125,000, and expenses (excluding pension expense of \(14,000, which does not include the actuarial loss) are \)85,000. Prepare Tevez鈥檚 statement of comprehensive income for 2017.

The following items appear on Brueggen Company鈥檚 financial statements. 1. Under the caption Assets: Pension asset/liability. 2. Under the caption Liabilities: Pension asset/liability. 3. Under the caption Stockholders鈥� Equity: Prior service cost as a component of Accumulated Other Comprehensive Income. 4. On the income statement: Pension expense. Instructions Explain the significance of each of the items above on corporate financial statements. (Note: All items set forth above are not necessarily to be found on the statements of a single company.)

Question: What is service cost, and what is the basis of its measurement?

Differentiate between a defined contribution pension plan and a defined benefit pension plan. Explain how the employer鈥檚 obligation differs between the two types of plans.

In examining the costs of pension plans, Helen Kaufman, CPA, encounters certain terms. The components of pension costs that the terms represent must be dealt with appropriately if generally accepted accounting principles are to be reflected in the financial statements of entities with pension plans. Instructions (a) (1) Discuss the theoretical justification for accrual recognition of pension costs. (2) Discuss the relative objectivity of the measurement process of accrual versus cash (pay-as-you-go) accounting for annual pension costs. (b) Explain the following terms as they apply to accounting for pension plans. (1) Market-related asset value. (2) Projected benefit obligation. (3) Corridor approach. (c) What information should be disclosed about a company鈥檚 pension plans in its financial statements and its notes?