Interpreting retirement plan disclosures. Exhibits 11.20 and 11.21 present selected information from the notes to the financial

Question:

Interpreting retirement plan disclosures. Exhibits 11.20 and 11.21 present selected information from the notes to the financial statements of a tire manufacturing company regarding its U.S. pension and health care retirement plans.

a. Refer to Exhibit 11.20. Why does the interest cost of the U.S. pension plans exceed the expected return on assets for 2006 and 2007, but these amounts are identical for 2008?

b. What is the likely reason for the decline in the net expense for this firm's health care plans between 2006 and 2007?

c. Why does this firm show no subtraction for the expected return on investments in computing net health care expense for each year?

d. What are the likely reasons that this firm reports an actuarial gain in its pension obligation and health care obligation for 2008?

e. Prepare an analysis that explains the change in the prior service cost for U.S. pension plans from $314 at the end of 2007 to $366 at the end of 2008.

f. Prepare an analysis that explains the change in the net actuarial loss for U.S. pension plans from $1,646 at the end of 2007 to $1,252 at the end of 2008.

g. Prepare an analysis that explains the change in the prior service cost for health care plans from $339 at the end of 2007 to $299 at the end of 2008.

h. Prepare an analysis that explains the change in the actuarial loss for health care plans from $340 at the end of 2007 to $221 at the end of 2008.

i. Give the journal entry that this firm would make at the end of 2008 to recognize net pension expense, pension funding, and the change in balance sheet accounts for its pension plan.

j. Give the journal entry that this firm would make at the end of 2008 to recognize net health care expense, health care funding, and the change in balance sheet accounts for its health careplan.

Funded Status of U.S. Pension and Health Care Plans EXHIBIT 11.21 (amounts in millions) (Problem 32) U.S. Pension Plans

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...