(Amortization of Accumulated OCI Balances) Keeton Company sponsors a defined benefit pension plan for its 600 employees. The company’s actuary provided the following information about the plan.
January 1,
December 31,
2012
2013
Projected benefit obligation
$2,800,000
$3,650,000
$4,195,000
Accumulated benefit obligation
1,900,000
2,430,000
2,900,000
Plan assets (fair value and market-related asset value)
1,700,000
3,790,000
Accumulated net (gain) or loss (for purposes of the corridor calculation)
–0–
198,000
(24,000)
Discount rate (current settlement rate)
9%
8%
Actual and expected asset return rate
10%
Contributions
1,030,000
660,000
The average remaining service life per employee is 10.5 years. The service cost component of net periodic pension expense for employee services rendered amounted to $400,000 in 2012 and $475,000 in 2013. The accumulated OCI (PSC) on January 1, 2012, was $1,260,000. No benefits have been paid.
Instructions
(a) Compute the amount of accumulated OCI (PSC) to be amortized as a component of net periodic pension expense for each of the years 2012 and 2013.
(b) Prepare a schedule which reflects the amount of accumulated OCI (G/L) to be amortized as a component of pension expense for 2012 and 2013.
(c) Determine the total amount of pension expense to be recognized by Keeton Company in 2012 and 2013.