Question
II. Corridor approach (amortization of net gains and losses.) Gibbs Company has 200 employees who are expected to receive benefits under the company's defined-benefit pension
II. Corridor approach (amortization of net gains and losses.) Gibbs Company has 200 employees who are expected to receive benefits under the company's defined-benefit pension plan. The total number of service-years of these employees is 2,000. The actuary for the company's pension plan calculated the following net gains and losses:
For the Year Ended
December 31 Gain Or Loss
2014 $ 640,000 Gain
2015 554,000 Loss
2016 990,000 Loss
Prior to 2014, there was no unrecognized net gain or loss. Information about the company's projected benefit obligation and fair value of plan assets follows:
As of January 1
2014 2015 2016
Projected benefit obligation $2,100,000 $2,340,000 $2,940,000
Fair value of plan assets 1,680,000 2,460,000 2,550,000
Instructions
Based on the above information about Gibbs Company, prepare a schedule which reflects the amount of net gain or loss to be amortized by the company as a component of pension expense for the years 2014, 2015, and 2016. The company amortizes net gains or losses using the straight-line method over the average service life of participating employees, which is 10 years for 2014, 2015, and 2016.
II. Corridor Approach. Show your calculations below, in good form, including your calculation of the amortized amount each year and the calculation of the balance in net gain or loss at the end of each year. Be sure to indicate gain or loss where appropriate.
2014 Beginning ______________________________
Amortization ______________________________
New G/L ______________________________
2015 Beginning ______________________________
Amortization ______________________________
New G/L ______________________________
2016 Beginning ______________________________
Amortization ______________________________
New G/L ______________________________
2017 Beginning ______________________________
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