Xerox reports the following pension and retiree health care ("Other") footnote as part of its \(10-\mathrm{K}\) report.

a. Describe what is meant by service cost and interest cost (the service and interest costs appear both in the reconciliation of the \(\mathrm{PBO}\) and in the computation of pension expense).

b. What is the actual return on the pension and the health care ("Other") plan investments in 2007? Was Xerox's profitability impacted by this amount?

c. Provide an example under which an "actuarial gain," such as the \(\$ 508\) million gain in 2007 that Xerox reports, might arise

d. What is the source of funds to make payments to retirees?

e. How much cash did Xerox contribute to its pension and health care plans in 2007?

f. How much cash did retirees receive in 2007 from the pension plan and the health care plan? How much cash did Xerox pay these retirees in 2007?
g. Show the computation of the 2007 funded status for the pension and health care plans.
h. The company reports \(\$ 108\) million "amortization of net actuarial (loss) gain" in the table relating to Other Comprehensive Income and \(\$ 75\) million "Recognized net actuarial loss" and \(\$ 33\) million "Recognized curtailment/settlement loss" in the net periodic benefit cost table. (Note that \(\$ 75\) million \(+\$ 33\) million \(=\$ 108\) million.) The company also reports a \(\$ 20\) million "Amortization of prior service (cost) credit" and a corresponding amount in the net periodic benefit cost table. Describe the process by which these amounts are transferred from Other Comprehensive Income to pension expense in the income statement.

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(in millions) Change in Benefit Obligation Benefit obligation, January 1 Service cost Interest cost. Pan participants' contributions. Plan amendments Actuarial gain.... Currency exchange rate changes Curtailments... Benefits paid/settlements. Benefit obligation, December 31 Change in Plan Assets Fair value of plan assets, January 1. Actual return on plan assets... Employer contribution Plan participants' contributions Currency exchange rate changes Benefits paid/settlements.... Fair value of plan assets, December 31. Net funded status (including under-funded and non-funded plans) at December 31. Pension Benefits Retiree Health 2007 2006 2007 2006 $10,467 $10,302 $ 1,592 $1,653 237 244 17 19 578 732 87 92 12 13 20 19 11 (234) - 31 (508) (85) (114) (105) 331 564 21 (1) (2) (669) (1,067) (122) (117) $10,458 $10,467 $ 1,501 $ 1,592 $ 9,217 $ 8,444 667 959 298 355 102 98 12 13 20 19 280 513 (669) (1,067) (122) (117) $ 9,805 $ 9,217 $ (653) $ (1,250) $(1,501) $(1,592)