Use the same set of facts as in P14-7. In addition, assume that based on ERISA rules, Magee Corporation must contribute the following amounts to the pension fund:

      _______________2017                   2018                2019                2020

Contributions…..$8,475…………..$11,000……..$15,000………$18,000

Magee intends to fund the pension plan only to the extent required by ERISA rules.

Assume that the contributions to the pension fund earn exactly a 10% rate of return annually.

Required:

1. The CEO of the company, Reece Magee, is considering three possible discount rates (8%, 10%, and 12%) for calculating the annual pension expense. Provide schedules showing how much pension expense will be reported under each of the three scenarios during the 2017-2021 period.

2. Provide schedules showing the funded status of the pension plan during the 2017-2020 period.

3. Magee is wondering which of the three discount rate assumptions would be considered the most and least conservative for the purposes of determining net income. Prepare a schedule that shows how total pension expense compares across the three discount rate assumptions. Explain your results.