Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 17, Problem 17.2P
PBO calculations; present value concepts
• LO17–3
Sachs Brands defined benefit pension plan specifies annual retirement benefits equal to: 1.6% × service years × final year’s salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2004 and is expected to retire at the end of 2038 after 35 years’ service. Her retirement is expected to span 18 years. Davenport’s salary is $90,000 at the end of 2018 and the company’s actuary projects her salary to be $240,000 at retirement. The actuary’s discount rate is 7%.
Required:
- 1. Draw a time line that depicts Davenport’s expected service period, retirement period, and a 2018 measurement date for the pension obligation.
- 2. Estimate by the projected benefits approach the amount of Davenport’s annual retirement payments earned as of the end of 2018.
- 3. What is the company’s projected benefit obligation at the end of 2018 with respect to Davenport?
- 4. If no estimates are changed in the meantime, what will be the company’s projected benefit obligation at the end of 2021 (three years later) with respect to Davenport?
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Problem 17-2 (Algo) PBO calculations; present value concepts [LO17-3]
Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.4% × service years × final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2007 and is expected to retire at the end of 2041 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $92,000 at the end of 2021 and the company's actuary projects her salary to be $290,000 at retirement. The actuary's discount rate is 6%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:2. Estimate by the projected benefits approach the amount of Davenport's annual retirement payments earned as of the end of 2021.3. What is the company's projected benefit obligation at the end of 2021 with respect to Davenport? (Do not round intermediate calculations. Round your final answer…
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Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.2% * service years * final year's salary,
payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of
2044 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $90,000 at the end of 2024 and the
company's actuary projects her salary to be $280,000 at retirement. The actuary's discount rate is 8%.
At the beginning of 2025, changing economic conditions caused the actuary to reassess the applicable discount rate. It was decided
that 9% is the appropriate rate.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Required:
Calculate the effect of the change in the assumed discount rate on the PBO at the beginning of 2025 with respect to Davenport.
Note: Do not round intermediate calculations. Round your…
Chapter 17 Solutions
Intermediate Accounting
Ch. 17 - Prob. 17.1QCh. 17 - Prob. 17.2QCh. 17 - Prob. 17.3QCh. 17 - What is the vested benefit obligation?Ch. 17 - Prob. 17.5QCh. 17 - Prob. 17.6QCh. 17 - Name three events that might change the balance of...Ch. 17 - Prob. 17.8QCh. 17 - Prob. 17.9QCh. 17 - Prob. 17.10Q
Ch. 17 - The return on plan assets is the increase in plan...Ch. 17 - Define prior service cost. How is it reported in...Ch. 17 - Prob. 17.13QCh. 17 - Is a companys PBO reported in the balance sheet?...Ch. 17 - What two components of pension expense may be...Ch. 17 - Prob. 17.16QCh. 17 - Evaluate this statement: The excess of the actual...Ch. 17 - Prob. 17.18QCh. 17 - TFC Inc. revises its estimate of future salary...Ch. 17 - Prob. 17.20QCh. 17 - Prob. 17.21QCh. 17 - Prob. 17.22QCh. 17 - The components of postretirement benefit expense...Ch. 17 - The EPBO for Branch Industries at the end of 2018...Ch. 17 - Prob. 17.25QCh. 17 - Prob. 17.26QCh. 17 - Prob. 17.1BECh. 17 - Prob. 17.2BECh. 17 - Prob. 17.3BECh. 17 - Prob. 17.4BECh. 17 - Prob. 17.5BECh. 17 - Prob. 17.6BECh. 17 - Prob. 17.7BECh. 17 - Prob. 17.8BECh. 17 - Prob. 17.9BECh. 17 - Prob. 17.10BECh. 17 - Net gain LO176 The projected benefit obligation...Ch. 17 - Prob. 17.12BECh. 17 - Prob. 17.13BECh. 17 - Postretirement benefits; determine the APBO and...Ch. 17 - Prob. 17.15BECh. 17 - Prob. 17.1ECh. 17 - Prob. 17.2ECh. 17 - Prob. 17.3ECh. 17 - Prob. 17.4ECh. 17 - Prob. 17.5ECh. 17 - Prob. 17.6ECh. 17 - Prob. 17.7ECh. 17 - Prob. 17.8ECh. 17 - Prob. 17.9ECh. 17 - Prob. 17.10ECh. 17 - Prob. 17.11ECh. 17 - PBO calculations; ABO calculations; present value...Ch. 17 - Prob. 17.13ECh. 17 - Prob. 17.14ECh. 17 - Prob. 17.15ECh. 17 - Prob. 17.16ECh. 17 - Prob. 17.17ECh. 17 - Prob. 17.18ECh. 17 - Prob. 17.19ECh. 17 - Prob. 17.20ECh. 17 - Prob. 17.21ECh. 17 - Prob. 17.22ECh. 17 - Prob. 17.23ECh. 17 - Prob. 17.24ECh. 17 - Prob. 17.25ECh. 17 - Prob. 17.26ECh. 17 - Prob. 17.27ECh. 17 - Prob. 17.28ECh. 17 - Prob. 17.29ECh. 17 - Prob. 17.30ECh. 17 - Prob. 17.31ECh. 17 - Prob. 17.32ECh. 17 - Prob. 17.33ECh. 17 - Prob. 17.1PCh. 17 - PBO calculations; present value concepts LO173...Ch. 17 - Service cost, interest, and PBO calculations;...Ch. 17 - Prob. 17.4PCh. 17 - Prob. 17.5PCh. 17 - Prob. 17.6PCh. 17 - Determining the amortization of net gain LO176...Ch. 17 - Prob. 17.8PCh. 17 - Prob. 17.9PCh. 17 - Prob. 17.10PCh. 17 - Prob. 17.11PCh. 17 - Prob. 17.12PCh. 17 - Prob. 17.13PCh. 17 - Prob. 17.14PCh. 17 - Prob. 17.15PCh. 17 - Prob. 17.16PCh. 17 - Prob. 17.17PCh. 17 - Prob. 17.18PCh. 17 - Prob. 17.19PCh. 17 - Prob. 17.20PCh. 17 - Prob. 17.21PCh. 17 - Prob. 17.1BYPCh. 17 - Prob. 17.2BYPCh. 17 - Prob. 17.3BYPCh. 17 - Prob. 17.5BYPCh. 17 - Prob. 17.6BYPCh. 17 - Prob. 17.7BYPCh. 17 - Prob. 17.8BYPCh. 17 - Prob. 17.9BYPCh. 17 - Prob. 17.11BYPCh. 17 - Prob. 1CCTCCh. 17 - Prob. 1CCIFRS
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- rr.17 Clark Industries has a defined benefit pension plan that specifies annual, year-end retirement benefits equal to: 1.3% × Service years × Final year’s salary Stanley Mills was hired by Clark at the beginning of 2005. Mills is expected to retire at the end of 2049 after 45 years of service. His retirement is expected to span 15 years. At the end of 2024, 20 years after being hired, his salary is $96,000. The company’s actuary projects Mills’s salary to be $430,000 at retirement. The actuary’s discount rate is 6%. For all requirements, round final answers to the nearest whole dollars. Do not round intermediate calculations. Use Excel, or a financial calculator. Required: Estimate the amount of Stanley Mills’s annual retirement payments for the 15 retirement years earned as of the end of 2024.arrow_forwardnkt.2arrow_forwardSM5arrow_forward
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