5. AutoCo, a large automobile company, reports operating income of $15.0 billion,

$15.5 billion, and $16.0 billion over the next three years. Exhibit 20.10 displays a breakout of its pension expense from the footnotes of its annual report. Use this breakout to eliminate nonoperating income related to pensions from operating income reported in AutoCo’s income statement.

EXHIBIT 20.10 AutoCo: Annual Report Note 10— AutoCo: Annual report Postretirement benefits and employee stock ownership plan Pension benefits Other retiree benefits Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 Service cost 210 270 280 90 95 85 Interest cost 450 520 500 250 230 220 Expected return on plan assets (500) (530) (470) (450) (420) (400)

Prior service cost (credit) amortization 10 20 10 (30) (20) (30)

Net actuarial loss amortization 50 10 50 5 10 5 Curtailment and settlement gain 10 (40) (200) – (5) (5)

Gross benefit cost (credit) 230 250 170 (135) (110) (125)

Dividends on ESOP preferred stock – – – (90) (95) (85)

Net periodic benefit cost (credit) 230 250 170 (225) (205) (210)