Question

Pension data for Fahy Transportation Inc. include the following: ($ in millions) Discount rate, 9% Expected return on plan assets, 12% Actual return on plan assets, 13% Projected benefit obligation, January 1 $ 620 Plan assets (fair value), January 1 600 Plan assets (fair value), December 31 630 Benefit payments to retirees, December 31 84 Required: Assuming cash contributions were made at the end of the year, what was the amount of those contribution

Answer 1

Answer:

$36

Explanation:

Given that,

Projected benefit obligation, January 1 = $ 620

Plan assets (fair value), January 1 = $600

Plan assets (fair value), December 31 = $630

Benefit payments to retirees, December 31 = $84

Actual return:

= Plan assets (fair value), January 1 × Actual return on plan assets

= $600 × 13%

= $78

Cash contributions:

= Ending plan assets + Retirement benefits - Actual return on plan assets - Beginning plan assets (fair value)

= $630 + $84 - $78 - $600

= $36