Campbell Soup

Refer to the financial statements of Campbell Soup Company in Appendix A. The Note on Pension Plans and Retirement Benefits describes computation of pension expense, projected benefit obligation (PBO), and other elements of the pension plan (all amounts in millions).

Required:

a. Explain what the service cost of $22.1 for Year 11 represents.

b. What discount rate did the company assume for Year 11? What is the effect of Campbells change from the discount rate used in Year 10?

c. How is the interest on projected benefit obligation computed?

d. Actual return on assets is $73.4. Does this item enter in its entirety as a component of pension cost? Explain.

e. Campbell shows an accumulated benefit obligation (ABO) of $714.4. What is this obligation?

f. Identify the PBO amount and explain what accounts for the difference between it and the ABO.

g. Has Campbell funded its pension expense at the end of Year 11?

CHECK (b) Year 11 rate, 8.75%

Campbell Soup Supplemental Schedule of Sales and Earnings weiow dollars ear II Year 10 Year 9 Sales Sales Contributions by division Campbell North America Campbell U.S.A Campbell Canada 3,911.8 352.0 S242.3 23.8 266.1 632.7 53,932.7 S370.8 53,666.9 313.4 396.4 3,980.3 35.3 384.0 25.6 263.8668.0 668.0 4.316. Campbell Biscuit and Bakery Pepperidge Farm International Biscuit 53.6 73.6 17.6 195.3 91.2 57.0 8.9 65.9 548.4 780 569.0 582.0 11.7 788.4 Campbell Inuernational 2294s 1030.3 1,222.9 39.4 1,189.8 168.6 ,0303 (117.8) Interdivision (71.0) (78.0) 649) Tolel sales 6,204.1 6,205.8 $5,672.1 293.7 16.5) 94.0) (3.8) 213.6 (31.3) (55.8) (20.0) 798.6 Tetal operating arnings Unallocated corporate expenses Interest, net Foreign currency translation adjustments Taxes on earnings (90.2) (265.9) $401.5 Net carnings 4.4 $13.1 Net sarnings por share $3.16 $.03 $.10