Pronghorn Corp. has the following beginning-of-the-year present values for its projected benefit obligation and market-related values for its pension plan assets. Projected Plan
Benefit Assets
Obligation Value
2013 2,000,000 $1,900,000
2014 2,400,000 2,500,000
2015 2,950,000 2,600,000
2016 3,600,000 3,000,000
The average remaining service life per employee in 2016 and 2017 is 10 years and in 2018 and 2019 is 12 years. The net gain or loss that occurred during each year is as follows: 2016, $288,400 loss; 2017, $92,700 loss; 2018, $11,330 loss; and 2019, $25,750 gain. (In working the solution, the gains and losses must be aggregated to arrive at year-end balances).
Using the corridor approach, compute the amount of net gain or loss amortized and charged to pension expense in each of the four years, setting up an appropriate schedule.

Year Minimum Amortization of Loss

2016 $0

2017 $3,840

2018 $ 6,855

2019 $1,811.25

Explanation:

Computation of the amount of net gain or loss amortized and charged to pension expense in each of the four years.

Corridor and Minimum Loss Amortization

Year 2016

Projected Benefit Obligation (a) $2,000,000

Plan Assets $1,900,000

10%Corridor 200,000

(10%×$2,000,000)

AccumulatedOCI (G/L) (a) $0

Minimum Amortization of loss $0

Year 2017

Projected Benefit Obligation (a) $2,400,00

PlanAssets $2,500,000

10%Corridor 250,000

(10%×$2,500,000)

AccumulatedOCI (G/L) (a) $288,400

Minimum Amortization of loss $3,840 (b)

Year 2018

Projected Benefit Obligation (a) $2,950,000

PlanAssets $2,600,000

10%Corridor 295,000

(10%×$2,950,000)

AccumulatedOCI (G/L) (a) $377,260(c)

Minimum Amortization of loss $6,855 (d)

Year 2019

Projected Benefit Obligation (a) $3,600,000

PlanAssets $3,000,000

10%Corridor 360,000

(10%×$3,600,000)

AccumulatedOCI (G/L) (a) $381,735(e)

Minimum Amortization of loss $1,811.25 (f)

Workings

A. As of the beginning of the year

B. ($288,400-$250,000)÷10 years

=$38,400÷10 years

=$3,840

C. ($288,400-$3,840+$92,700)

=$377,260

D.($377,260-$295,000)÷12 years

=$82,260÷12 years

=$6,855

E. $377,260-$6,855+$11,330

=$381,735

F. ($381,735-$360,000)÷12 years

=$21,735 ÷12 years

=$1,811.25

Hence,

Year Minimum Amortization of Loss

2016 $0

2017 $3,840

2018 $ 6,855

2019 $1,811.25

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