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snow_tiger [21]
3 years ago
8

Martinez Corp. has the following beginning-of-the-year present values for its projected benefit obligation and market-related va

lues for its pension plan assets.
Projected Benefit Obligation Plan Assets Value
2019 $2,340,000 $2,223,000
2020 2,808,000 2,925,000
2021 3,451,500 3,042,000
2022 4,212,000 3,510,000

The average remaining service life per employee in 2019 and 2020 is 10 years and in 2021 and 2022 is 12 years. The net gain or loss that occurred during each year is as follows:

2019, $327,600 loss; 2020, $105,300 loss; 2021, $12,870 loss; and 2022, $29,250 gain. (In working the solution, the gains and losses must be aggregated to arrive at year-end balances.)

Required:
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
2013 $
2014 $
2015 $
2016 $
Business
1 answer:
Reptile [31]3 years ago
6 0

Answer:

2020  $11,700

2021  $8,080

2022  $14,040

Explanation:

PBO = Projected benefit Obligation

PA =  Plan Asset

Acc. OCI  = Accumulated OCI Gain /  Loss

Min. Amort loss = Minimum Amortization of Loss

Year : PBO ; PA ; Corridor 10% ; Acc. OCI ;  Min. Amort loss

2019 : $2,340,000 ;  $2,223,000 ;  $234,000

2020 : $2,808,000 ;  $2,925,000 ;  $280,800 ;  $397,800 ; 11,700

2021 :  $3,451,500 ;  $3,042,000 ;  $345,150 ;  $264,350 ; 8,080

2022 :  $4,212,000 ;  $3,510,000 ;  $421,200 ;  $280,800 ; 14,040

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3 years ago
Starset, Inc., has a target debt-equity ratio of 1.15. Its WACC is 8.6 percent, and the tax rate is 21 percent.
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Answer:

a. 4.94%

b. 11.48%

Explanation:

Here in this question, we are interested in calculating the pretax cost of debt and cost of equity.

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The debt equity ratio = 1.15

since Equity = 1 ; Then

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WACC = Cost of equity x Weight of equity + Pretax Cost of debt x Weight of debt x (1-Tax rate)

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Pretax cost of debt = ?

Weight of debt = debt equity ratio/total cost of debt = 1.15/2.15

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Substituting these values, we have;

8.6% = 14% x 1/2.15 + Pretax cost of debt x 1.15/2.15 x (1-21%)

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8.6% = Cost of equity x 1/2.15 + 6.1% x 1.15/2.15

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Cost of equity = 11.48%

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