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Chapter 20: Q4Q. (page 1161)

The meaning of the term 鈥渇und鈥� depends on the context in which it is used. Explain its meaning when used as a noun. Explain its meaning when it is used as a verb.

Short Answer

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The fund refers to the amount of money needed by an organization to carry out its business activities or sustain itself in the competitive market. Without funds, an organizationcannot operate.

Step by step solution

01

“Fund” as a noun

The word 鈥淔und,鈥� when used as a noun refers to the period where the organization鈥檚 agency (funding) accumulates its total assets for the pension benefit for its employees when the amount of pension is due.

02

“Fund” as a verb

鈥淔und,鈥� when used as a verb, refers to the duration where an organization is liable to pay a certain sum to its funding agency.

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Most popular questions from this chapter

At the end of the current year, Kennedy Co. has a defined benefit obligation of \(335,000 and pension plan assets with a fair value of \)245,000. The amount of the vested benefits for the plan is \(225,000. Kennedy has an actuarial gain of \)8,300. What account and amount(s) related to its pension plan will be reported on the company鈥檚 statement of financial position? (a) Pension Liability and \(74,300. (b) Pension Liability and \)90,000. (c) Pension Asset and \(233,300. (d) Pension Asset and \)110,000.

Question: The following defined pension data of Doreen Corp. apply to the year 2017.

Defined benefit obligation, 1/1/17 (before amendment) $560,000

Plan assets, 1/1/17 546,200

Pension asset/liability 13,800 Cr.

On January 1, 2017, Doreen Corp., through plan amendment,

grants past service benefits having a present value of 120,000

Discount rate 9%

Service cost 58,000

Contributions (funding) 65,000

Actual return on plan assets 49,158

Benefits paid to retirees 40,000

Instructions

For 2017, prepare a pension worksheet for Doreen Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.

In computing the interest component of pension expense, what interest rates may be used?

Towson Company has experienced tough competition for its talented workforce, leading it to enhance the pension benefits provided to employees. As a result, Towson amended its pension plan on January 1, 2017, and granted past service costs of \(250,000. Current service cost for 2017 is \)52,000. Interest expense is \(18,000, and interest revenue is \)5,000. Actual return on assets in 2017 is \(3,000. What is Towson鈥檚 pension expense for 2017? (a) \)65,000. (c) \(317,000. (b) \)302,000. (d) $315,000.

The following facts apply to the pension plan of Boudreau Inc. for the year 2017. Plan assets, January 1, 2017 $490,000 Projected benefi t obligation, January 1, 2017 490,000 Settlement rate 8% Service cost 40,000 Contributions (funding) 25,000 Actual and expected return on plan assets 49,700 Benefi ts paid to retirees 33,400 Instructions Using the preceding data, compute pension expense for the year 2017. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2017 and the year-end balances in the related pension accounts.
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