Pension:

A partially completed pension spreadsheet showing the relationships among the elements that comprise the defined benefit pension plan of Global Products is given below. The average remaining service life of the active employee group is 20 years in the current year as well as the previous years. 20 years is also used for amortization, if any, of net loss / gain.

Required:

1. Fill in the missing amounts. (20 points)

		PBO	Plan assets	Prior Service	Net loss (gain)	Pension Exp	Cash	Net (liab) asset
Balance 1/1/year 5		(490.00)	360.00	180.00	(60.00)
Service Cost						80.00
Interest Cost - 4%
Expected return on assets						(18.00)
Diff expected and actual					5.00
Amortization PSC
Amortization Net loss/gain
Change in PBO per actuary
Cash funding			50
Benefits paid		30
Ending balance 12/31/year 5		(500)

2. What was the expected rate of return on the assets? (2 points)

3. For all balance sheet accounts, list the Account name, the type of account (asset, liability, stockholders equity), and the amount as shown on the companys balance sheet at year end. (3 points)

4. Net income (ignore taxes) was $150. Prepare a comprehensive income statement, assuming all OCI items relate to the pension. (3 points)

5. Prepare the journal entries the company makes at the end of the year. (10 points)

6. As part of the new Covid-19 aid package, companies will have flexibility with funding their pensions. Companies can use a corporate bond yield of approximately 5% as the minimum rate to determine the value of their pension liabilities even when current market rates are lower, as is true today. Before the law, there was no such minimum. The minimum floor rate, which is higher than the current market rate, is expected to reduce short-term contributions that companies need to make for their plan. (3 points)

Explain how this change reduces contributions companies make for their plan.