CA20-4 (Major Pension Concepts) Lyons Corporation is a medium-sized manufacturer of papcrboard containers and boxes. The corporation sponsors a non-contributoryefined benefit pension plan that oov ers its 250 employees. Tim Shea has recently been hired as president of Lyons Corpoation. While review- ing last year's financial statements with Anita Kroll, controller, Shea expressed confusion about several of the items in the footnote to the financial slatements relating to the pension plan In part, the footnote Note J. The company has a defined benefit pension plan covering substantially all of its employees of employment. The company's funding policyis to contribute annually the maximum amount al- reads as follows. The benefils are based on years of service and the employee's compensation during the last four years lowed under the tax law. Contributions are intended to provide for benefits expected to be carned in the future as well as those earned to date. The nel periodic pension expense on Lyons Corporation's comparative income slatement was E72,000 in 2011 and 57680 in 2010. The following are selected figures from the plan's funded status and amounts recognized in the Lyons Corporation's statement of financial position at December 31, 2011 iC0 omitted). E(1,20 1,050 Defined beneft obligation Pisn 83sets at fair value Defined beneft obligation in excess of plan assets150 Given that Lyons Corporation's work foroe has been stable for the last 6years, Shea could not un- derstand the increase in the net periodic pesion expense. Kroll explained that the net periodic pension expense consists of several elements, some of which may increase or decrease the net expense Instructions (a) The determination of the net periodic pension expense is a function of five elements. List and lb) Describe the major difference and the major similarity between the vested benefit obligation and (c) brieflv dcscribe each of the clenents. the defined benefit obligationt (1) Explain why pension gains and kosses may not be recognized on the income statement in the period in which they arise. (2) Briefly describe he pension gains and ses are reoognized CA20-4 (Major Pension Concepts) Lyons Corporation is a medium-sized manufacturer of papcrboard containers and boxes. The corporation sponsors a non-contributoryefined benefit pension plan that oov ers its 250 employees. Tim Shea has recently been hired as president of Lyons Corpoation. While review- ing last year's financial statements with Anita Kroll, controller, Shea expressed confusion about several of the items in the footnote to the financial slatements relating to the pension plan In part, the footnote Note J. The company has a defined benefit pension plan covering substantially all of its employees of employment. The company's funding policyis to contribute annually the maximum amount al- reads as follows. The benefils are based on years of service and the employee's compensation during the last four years lowed under the tax law. Contributions are intended to provide for benefits expected to be carned in the future as well as those earned to date. The nel periodic pension expense on Lyons Corporation's comparative income slatement was E72,000 in 2011 and 57680 in 2010. The following are selected figures from the plan's funded status and amounts recognized in the Lyons Corporation's statement of financial position at December 31, 2011 iC0 omitted). E(1,20 1,050 Defined beneft obligation Pisn 83sets at fair value Defined beneft obligation in excess of plan assets150 Given that Lyons Corporation's work foroe has been stable for the last 6years, Shea could not un- derstand the increase in the net periodic pesion expense. Kroll explained that the net periodic pension expense consists of several elements, some of which may increase or decrease the net expense Instructions (a) The determination of the net periodic pension expense is a function of five elements. List and lb) Describe the major difference and the major similarity between the vested benefit obligation and (c) brieflv dcscribe each of the clenents. the defined benefit obligationt (1) Explain why pension gains and kosses may not be recognized on the income statement in the period in which they arise. (2) Briefly describe he pension gains and ses are reoognized
