Company g purchase annuities with plan assets for 8 of the...

Company g purchase annuities with plan assets for 8% of the plan’s benefits in a way that eliminates future risk to the company. The cost of the settlement is less than service cost plus interest cost. Does this transaction result in settlement accounting for the plan?

Technique Technologies, Inc. started a defined-benefit plan this year. As part of the union agreement, it provided $560,000 in retroactive benefits to all employees for their prior years' service. The company amortized $15,600 of these benefits during the current year. At the end of the year, the actuary provided you with the following information related to the plan: - Service cost for the year: $915,590. - Actual return (loss) on plan assets: ($128,000). - Contributions for the year: $345,700. - Expected return on plan assets: loss of $150,000. - Settlement rate: 10%. - No retirement benefits were paid during the year. Required: a. Compute the pension cost for the year. b. Determine the ending balances of the plan assets and the projected benefit obligation and indicate the funded status of the plan. c. Prepare the journal entry to record the current year's pension cost. d. Reconcile the ending balance in accumulated other comprehensive income.

Adi S.

Question

Company g purchase annuities with plan assets for 8% of the plan’s benefits in a way that eliminates future risk to the company. The cost of the settlement is less than service cost plus interest cost. Does this transaction result in settlement accounting for the plan?

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