1. Farris Electronics amended its pension plan effective January 1, 2015. The increase in the Pension

Benefit Obligation occurring as a result of the plan amendment is $ 6,290,000. Farris arranged to fund

the prior service cost by equal annual contributions over the next 15 years at 10% interest. Farris will

make the first payment on December 31, 2015. The company decides to amortize the prior service cost

on a straight-line basis over the average remaining service life of its employees. As at January 1, 2015,

the company has 225 employees who are entitled to the benefits of the amendment. Farris estimates

that an average of 15 employees will retire each year.

1. Compute the amount Farris will pay each year to fund the prior service cost arising from the plan’s

amendment.

2. Compute Farris’s annual prior service cost amortization based on average remaining years of

employee service.

2. Concept Financial has a defined benefit pension plan for its employees. The following were the

balances for the pension plan as of January 1, 2015:

Annual Benefit Obligation $3,500,00

0

Pension Benefit Obligation 3,900,000

Deferred pension gain 420,000

Fair value of the pension fund 3,300,000

Market-related value of the pension fund ( five-year weighted average) 2,850,000

3

The pension plan would earn 12% of the market-related value of the pension fund in 2015. The actual

return on the pension fund was $315,000. The company has elected to amortize the deferred pension

gains and losses over 10 years.

Answer the following questions:

1. Compute the amount of deferred gain or loss for 2015.

2. Compute the amount of amortization of deferred pension gain or loss for 2015.

3. Computed pension expense is $ 534,000. However, this computation ignores any deferred gains or

losses for the year (in other words, actual, not expected return on the pension fund was included in the

computations) as well as any amortization of deferred gains or losses from prior years. What is pension

expense after considering the impact of deferred gains and losses and their amortization?

4. What is the deferred pension gain or loss that Concept will carry forward to 2016?

Your well-written paper must include title and reference pages. The paper should be formatted

according to the CSU-Global Guide to Writing and APA Requirements. Any supporting calculations

should be inserted in a table in your Word document. Do not submit two separate documents, as only

one document can be accepted