Identify whether the following items increase or decrease the balance in the pension accounts provided below. If the transaction does not affect a particular account, indicate no effect.
The transactions are: 1.) interest costs 2.) Amortization of a gain balance in the unrecognized gain/loss account 3.) Actual plan asset return is less than expected plan asset return for the year. Assume the OCI - Unrecognized Gain/Loss account has a loss balance
And the pension accounts are: Pension Expense, Cash, OCI-Unrecognized Gain/Loss, PBO, Plan Assets.
2. Explain the significance of each of the following items found on corporate financial statements. Note that not all items would necessarily be found on the statements of a single company.
"Pension Asset/Liability" found in the asset section of the balance sheet. 2.) "Pension Asset/Liability" found in the liability section of the balance sheet. 3.) "Prior Service Cost" found as part of Accumulated Other Comprehensive Income in the equity section of the balance sheet. 4.) "Pension Expense" found on the income statement.
3. Indicate whether each of the events listed below increase, decreases, or has no effect on an employer's projected benefit obligation.
Events: 1.) Interest cost 2.) Amortization of prior service cost 3.) Decrease in the average life expectancy of employees 4.) A plan amendment that increases benefits is made retroactive to prior years 5.) Cash contributions to the pension fund made by the employer 6.) Benefits paid to retirees 7.) Service cost 8.) The return on plan assets is lower than expected