P ag question Analyzing and Interpreting Pension Disclosures Assume El Du Pont De Nemours and Co. S 10-K report has the following disclosures related to its retirement plans (5 millions) Obligations and Funded status Pension Benefits December 31(5 millions) 2010 2009 Change in benefit obligation Benefit oblation at beginning of year $22.770 5 21.506 Service cost 207 192 interest cost 1.262 1.270 Plan participants contributions Actuarial loss an Benefits paid (1.584) (1.608) Amendments Net effects of acquisitions divestitures Benefit obligation at end of year $23924 522770 Change in plan assets Fair value of plan assets at beginning of year $17.10 $16209 Actual gain on plan assets 2015 2,219 Employer contributions Han participants contributions Benefits paid 1,5814) (1.608) Net effects of actionsvestitures Fair value of plan assets at end of year $18.403 5 17.143 Funded status 5. plans with plan assets $3,408) S0594) Non us. plans with plan assets 1652) (43) All other plans (1461) (1.490) Total 505.521) 55.627) 782 Type here to search Pension Benefits E e Pension Benefits in millions) Components of net periodic benefit cost (credit) and amounts recognized in other comprehensive Income 2010 2009 2008 Net periodic benefit (credit) cost Service cost $ 207 192 $209 Interest cost 1.262 1,270 1.286 Expected return on plan assets (1.435) (1.603) (1.932) Amortization of loss 507 278 56 Amortization of prior service cost 16 18 18 Curtaiment/settlement loss Net periodic benefit credit) cost $ 557 $155 $ (362) Changes in plan assets and benefit obligations recognized in other comprehensive income Netloss gain) 634 781 6,397 Amortization of loss (507) (278) (56) Prior service costs Amortization of prior service cost (16) (18) (18) Curtailment/settlement loss Total recognized in other comprehensive income $111 $ 485 56326 Total recognized in net periodic benefit cost and other comprehensive income 5668 $ 640 $5.964 Weighted-ave, assumptions used for net periodic benefit cost for years ended Dec. 31 2010 2009 2008 Dicsount Rate 5.80% 6,14% 6.01% Expected return on plan assets 8.64% 8.75% 8.74% Rate of compensation increase 4.24% 4.30% 4.28% The following benefit payments, which reflect future service, as appropriate, are expected to be paid: Pension Benefits (5 millions) 2011 2012 1.528 1.521 1.527 2013 2014 2015 Years 2016-2020 1.544 8.002 Type here to search Prison Home (a) How much pension expense (revenue) does DuPont report in its 2010 income statement? DuPont reports pension of $ million. (b) DuPont reports a $1.435 million expected return on pension plan assets as an offset to 2010 pension expense. Approximately, how is this amount computed (estimate from the numbers reported)? (Round your dollar answers to the nearest whole number.) million x million What is DuPont's actual gain or loss realized on its 2010 pension plan assets? ($ million) (c) What main factors affected DuPont's pension plan assets and pension liability during 2010? Oinvestment gains and employer contributions increased the plan assets. Service costs, interest costs, and actuarial losses increased the pension liability, and benefit payments reduced the liability. Benefits were paid directly by the company and did not affect plan assets Oinvestment gains and employer contributions increased the plan assets, and benefits paid reduced plan assets. Service costs and actuanal losses increased the pension liability, and benefit payments reduced the liability. Interest reflects the amount the company paid to its lenders and did not affect the pension obligation directly Olnvestment gains and employer contributions increased the plan assets, and benefits paid reduced plan assets. Service costs, interest costs and actuarial losses increased the pension liability, and benefit payments reduced the liability investment gains and employer contributions increased the plan assets, and benefits paid reduced plan assets. Service costs, interest costs and actuarial losses decreased the pension liability, and benefit payments reduced the liability, (d) Which of the following statements best describes what the phrase funded status means? What is the funded status of the 2010 DuPont pension plans? Funded status reflects the contributions that the company has made to the plan. O Funded status" is the excess or deficiency of the pension obligation over plan assets. Funded status refers to the extent to which the plan assets are invested in mutual funds. O'Funded status" reveals how much cash the plan has Type here to search A6 4 of 482000 21 My Subscriptic (d) Which of the following statements best describes what the phrase funded status means? What is the funded status of the 2010 DuPont pension plans? O"Funded status" reflects the contributions that the company has made to the plan. O"Funded status" is the excess or deficiency of the pension obligation over plan assets. O"Funded status" refers to the extent to which the plan assets are invested in mutual funds. O"Funded status" reveals how much cash the plan has. DuPont's pension plan is by $ million (e) DuPont decreased its discount rate from 6.14% to 5.8% in 2010. What effect(s) does this decrease have on the company's balance sheet and its income statement? OA decrease in the discount rate increases the PBO and increases pension cost. OA decrease in the discount rate increases the PBO and decreases pension cost. OA decrease in the discount rate reduces the PBO and decreases pension cost. OA decrease in the discount rate increases the PBO and has no effect on pension cost. (1) Which of the following statements best describes how DuPont's pension plan affected its 2010 cash flow? The company's cash flow increased as the increase in pension assets more than offset the increase in the PBO. There was no effect on the company's cash flow as all benefit payments are paid from plan assets. The company contributed cash to its pension plan in 2010. This contribution directly affected the company's cash flow. The company's cash flow increased by the gains on the plan's investment portfolio and decreased by the benefits paid to plan participants. Mail has new messages B) Explain how the returns on pension assets affect the amount of cash that DuPont must contribute to fund the pension plan. OAsset returns have no effect on DuPont's cash flow because increases in the PBO provide whatever financing the plan needs. Oshould pension investments decline as a result of a decline in the financial markets, DuPont might be required to increase its cash contr Asset returns have no effect on DuPont's cash flow because employee contributions make up any shortfall. Type here to search P ag question Analyzing and Interpreting Pension Disclosures Assume El Du Pont De Nemours and Co. S 10-K report has the following disclosures related to its retirement plans (5 millions) Obligations and Funded status Pension Benefits December 31(5 millions) 2010 2009 Change in benefit obligation Benefit oblation at beginning of year $22.770 5 21.506 Service cost 207 192 interest cost 1.262 1.270 Plan participants contributions Actuarial loss an Benefits paid (1.584) (1.608) Amendments Net effects of acquisitions divestitures Benefit obligation at end of year $23924 522770 Change in plan assets Fair value of plan assets at beginning of year $17.10 $16209 Actual gain on plan assets 2015 2,219 Employer contributions Han participants contributions Benefits paid 1,5814) (1.608) Net effects of actionsvestitures Fair value of plan assets at end of year $18.403 5 17.143 Funded status 5. plans with plan assets $3,408) S0594) Non us. plans with plan assets 1652) (43) All other plans (1461) (1.490) Total 505.521) 55.627) 782 Type here to search Pension Benefits E e Pension Benefits in millions) Components of net periodic benefit cost (credit) and amounts recognized in other comprehensive Income 2010 2009 2008 Net periodic benefit (credit) cost Service cost $ 207 192 $209 Interest cost 1.262 1,270 1.286 Expected return on plan assets (1.435) (1.603) (1.932) Amortization of loss 507 278 56 Amortization of prior service cost 16 18 18 Curtaiment/settlement loss Net periodic benefit credit) cost $ 557 $155 $ (362) Changes in plan assets and benefit obligations recognized in other comprehensive income Netloss gain) 634 781 6,397 Amortization of loss (507) (278) (56) Prior service costs Amortization of prior service cost (16) (18) (18) Curtailment/settlement loss Total recognized in other comprehensive income $111 $ 485 56326 Total recognized in net periodic benefit cost and other comprehensive income 5668 $ 640 $5.964 Weighted-ave, assumptions used for net periodic benefit cost for years ended Dec. 31 2010 2009 2008 Dicsount Rate 5.80% 6,14% 6.01% Expected return on plan assets 8.64% 8.75% 8.74% Rate of compensation increase 4.24% 4.30% 4.28% The following benefit payments, which reflect future service, as appropriate, are expected to be paid: Pension Benefits (5 millions) 2011 2012 1.528 1.521 1.527 2013 2014 2015 Years 2016-2020 1.544 8.002 Type here to search Prison Home (a) How much pension expense (revenue) does DuPont report in its 2010 income statement? DuPont reports pension of $ million. (b) DuPont reports a $1.435 million expected return on pension plan assets as an offset to 2010 pension expense. Approximately, how is this amount computed (estimate from the numbers reported)? (Round your dollar answers to the nearest whole number.) million x million What is DuPont's actual gain or loss realized on its 2010 pension plan assets? ($ million) (c) What main factors affected DuPont's pension plan assets and pension liability during 2010? Oinvestment gains and employer contributions increased the plan assets. Service costs, interest costs, and actuarial losses increased the pension liability, and benefit payments reduced the liability. Benefits were paid directly by the company and did not affect plan assets Oinvestment gains and employer contributions increased the plan assets, and benefits paid reduced plan assets. Service costs and actuanal losses increased the pension liability, and benefit payments reduced the liability. Interest reflects the amount the company paid to its lenders and did not affect the pension obligation directly Olnvestment gains and employer contributions increased the plan assets, and benefits paid reduced plan assets. Service costs, interest costs and actuarial losses increased the pension liability, and benefit payments reduced the liability investment gains and employer contributions increased the plan assets, and benefits paid reduced plan assets. Service costs, interest costs and actuarial losses decreased the pension liability, and benefit payments reduced the liability, (d) Which of the following statements best describes what the phrase funded status means? What is the funded status of the 2010 DuPont pension plans? Funded status reflects the contributions that the company has made to the plan. O Funded status" is the excess or deficiency of the pension obligation over plan assets. Funded status refers to the extent to which the plan assets are invested in mutual funds. O'Funded status" reveals how much cash the plan has Type here to search A6 4 of 482000 21 My Subscriptic (d) Which of the following statements best describes what the phrase funded status means? What is the funded status of the 2010 DuPont pension plans? O"Funded status" reflects the contributions that the company has made to the plan. O"Funded status" is the excess or deficiency of the pension obligation over plan assets. O"Funded status" refers to the extent to which the plan assets are invested in mutual funds. O"Funded status" reveals how much cash the plan has. DuPont's pension plan is by $ million (e) DuPont decreased its discount rate from 6.14% to 5.8% in 2010. What effect(s) does this decrease have on the company's balance sheet and its income statement? OA decrease in the discount rate increases the PBO and increases pension cost. OA decrease in the discount rate increases the PBO and decreases pension cost. OA decrease in the discount rate reduces the PBO and decreases pension cost. OA decrease in the discount rate increases the PBO and has no effect on pension cost. (1) Which of the following statements best describes how DuPont's pension plan affected its 2010 cash flow? The company's cash flow increased as the increase in pension assets more than offset the increase in the PBO. There was no effect on the company's cash flow as all benefit payments are paid from plan assets. The company contributed cash to its pension plan in 2010. This contribution directly affected the company's cash flow. The company's cash flow increased by the gains on the plan's investment portfolio and decreased by the benefits paid to plan participants. Mail has new messages B) Explain how the returns on pension assets affect the amount of cash that DuPont must contribute to fund the pension plan. OAsset returns have no effect on DuPont's cash flow because increases in the PBO provide whatever financing the plan needs. Oshould pension investments decline as a result of a decline in the financial markets, DuPont might be required to increase its cash contr Asset returns have no effect on DuPont's cash flow because employee contributions make up any shortfall. Type here to search