60.1K

Verified Solution

Link Copied!

Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to $\backslash (1\mathrm{.}6\backslash \%\backslash$times $\backslash )$ service years $\backslash (\backslash$times $\backslash )$ 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 $\backslash (\backslash$$ $99,000\backslash )$ at the end of $2024$ and the company's actuary projects her salary to be $\backslash (\backslash$$ $325,000\backslash )$ at retirement. The actuary's discount rate is $\backslash (9\backslash \%\backslash ).$

Note: Use tables, Excel, or a financial calculator. $($FV of $\backslash$$$1,$ PV of $\backslash$$$1,$ FVA of $\backslash$$$1,$ PVA of $\backslash$$$1,$ FVAD of $\backslash$$$1$ and PVAD of $\backslash$$$1)$

At the beginning of $2025,$ the pension formula was amended to:

$\backslash (1\mathrm{.}80\backslash \%\backslash$times $\backslash )$ Service years $\backslash (\backslash$times $\backslash )$ Final year's salary

The amendment was made retroactive to apply the increased benefits to prior service years.

Required:

$1.$ What is the company's prior service cost at the beginning of $2025$ with respect to Davenport after the amendment described above?

$2.$ Since the amendment occurred at the beginning of $2025,$ amortization of the prior service cost begins in $2025.$ What is the prior service cost amortization that would be included in pension expense?

$3.$ What is the service cost for $2025$ with respect to Davenport?

$4.$ What is the interest cost for $2025$ with respect to Davenport?

$5.$ Calculate pension expense for $2025$ with respect to Davenport, assuming plan assets attributable to her of $\backslash (\backslash$$ $150,000\backslash )$ and a rate of return $($actual and expected$)$ of $\backslash (10\backslash \%\backslash ).$

Note: For all requirements, do not round intermediate calculations. Round your final answers to the nearest whole dollar.

Answer & Explanation Solved by verified expert

See Answer