Methods to Amortize Prior Service Cost

Wolz Company, a small business, has had a defined benefit pension plan for its employees for several years. At the beginning of 2013, Wolz amended the pension plan; this amendment provided for increase benefits based on service rendered by certain employees in prior periods. Wolz's actuary has determine that the related prior service cost amounts to $140,000. Wolz has four participating employees who are expected to receive the increase benefits. The following is a schedule identifying the employees and their expected years of future service.

Employee Expected Years of

Numbers Future Service

1 2

2 3

3 4

4 5

1a. Using a straight-line method, compute the remaining service life and. If require, round your answers to one decimal place.

1b. Using the straight-line method, prepare a schedule to amortize the prior service cost. Enter all amount as positive numbers.

Wolz Company

Prior Service Cost Amortization

2013-2016

Total Amortization Remaining

Prior service to increase Prior Service

Cost Pension Expense Cost

2013 ______________

2014______________

2015_______________

2016_______________

2a. Using the years-of-future method instead, prepare a set of schedules to determine the amortization fraction for each year. Enter the amortization fraction as a fraction. For example: 3/10

Wolz Company

Years of Future Service

Amortization Fractions

Expected Number of Number of Number of Number of Number or

Years of Service Years Service Years Service Years Service Years Service Years

Future service Rendered in 2013 Rendered in 2014 Rendered in 2015 Rendered in 2016 Rendered in 2017

2b.. Using the years- of future service method instead, prepare a set of schedules to determine the amortization of the prior service cost. Enter all amounts as positive numbers

Wolz Company

Years of future Service

Prior service Cost Amortization

Total Amortization Amortization Remaining

Prior Service Fraction to increase Prior Service

Cost Pension Expense Cost

2013

2014

2015

2016

2017

Amortization Fractions

Expected

Years of

Future Service