Use the same set of facts as in P14-7. In addition, assume that based on ERISA rules, Magee Corporation must contribute the following amounts to the pension fund:

Magee intends to fund the pension plan only to extent required by ERISA rules. Assume that the contributions to the pension fund earn exactly a 10% rate of return annually.

Required:
1. The CEO of the company, Reece Magee, is considering three possible discount rates (8%, 10%, and 12%) for calculating the annual pension expense. Provide schedules showing how much pension expense will be reported under each of the three scenarios during the 2008-2012 period.
2. Provide schedules showing the funded status of the pension plan during the 2008-2011 period.
3. Magee is wondering which of the three discount rate assumptions would be considered the most and least conservative for the purposes of determining net income. Prepare a schedule that shows how total pension expense compares across the three discount rate assumptions. Explain your results.

Transcribed Image Text:

2008 2009 2010 2011 Contributions $8,475 $11,000 $15,000 $18,000