Business Finance
ACC302 Kaplan Amortization of Unrecognized Gains/Losses For Pensions

Accounting 302

Question Description

Vickie Plato, accounting clerk in the personnel office of Streisand Corp., has begun to compute pension expense for 2019 but is not sure whether or not she should include the amortization of unrecognized gains/losses. She is currently working with the following beginning-of-the-year present values for the projected benefit obligation and market-related values for the pension plan:

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 $280,000 Loss

2017 85,000 Loss

2018 12,000 Loss

2019 25,000 gain


Answer the following questions in the Discussion Board:

You are the manager in charge of accounting. Write a memo to Vickie Plato, explaining why in some years she must amortize some of the net gains and losses and in other years she does not need to. In order to explain this situation fully, you must compute the amount of net gain or loss that is amortized and charged to pension expense in each of the 4 years listed above. Include an appropriate amortization schedule, referring to it whenever necessary.

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2016). Accounting for pensions and postretirement benefits. Intermediate accounting (16th ed.). (p. 1177). New York, NY: John Wiley & Sons, Inc.

Final Answer

Attached.

Running Head: MEMO

1

Memo to Vickie Plato
Name
Course
Tutor
Date

MEMO

2

TO: Vickie Plato
FROM: Accounting Manager
CC:
DATE: MARCH 28, 2018
SUBJECT: Amortization of Unrecognized Gains/Losses for Pensions
The asset gains and losses and the liability gains and losses can cancel each other. Due to this,
the accumulated OCI account which is associated with the gains and losses will not grow in a
significant manner. In case of notable growth in the OCI account, then the cancellation will not
occur. In an effort to limit ...

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