Based on the above information about Gibbs Company, prepare a schedule which reflects the amount of net gain or loss to be amortized by the company as a component of pension expense for the years 2014, 2015, and 2016.

Pension calculations | Business & Finance homework help

In the case of Gibbs Company, a schedule can be created which reflects the amount of net gain or loss to be amortized by the company as a component of pension expense for 2014, 2015, and 2016. This is calculated by taking the difference between projected benefit obligation (PBO) and fair value of plan assets (FVPA) and then subtracting any unrecognized gains or losses from prior periods.

For 2014, PBO is $2,100,000 while FVPA is $1,680,000. Since there are no unrecognized gains or losses from prior periods we can calculate that Gibbs Company has an underfunded liability in the amount of $420,000 ($2,100,000 – $1 680 , 000). Therefore they must amortize this underfunded liability as part of their pension expense for 2014.

For 2015 PBO is $2 340 000 while FVPA is now 2 460 000 resulting in a net overfunded position of 120 000 ($2 460 000 -$2 340 000). However since there was an existing under funded position from 2014 it must first be taken into account before determining how to treat this positive balance In other words if we subtract 420 000 from 120 00 0 we arrive at a remaining balance due to recognised gains and losses from previous years amounted to 300 00 Thus in 2015 Gibbs Company will only record 300 00 for its Pension Expense rather than full 140 0000 amount

Finally for 2016 PBO stands 2 940 00 while FVPA remains unchanged at 2 550 OOO giving us an uderfunded factorof 390000 ($29 400oo- 25 50 ooo ) When combined with our recognise d previous year’s loss which amounts to 30 0000 We arrive at total 690000 figure which should be recorded as Pension Expense in2016 .
Overall these three years demonstrate how proper tracking on both current year factors such as PBO vs FVPO along previously unrecorded Gains nd Loses helps companies accurately calculate their Net Gains/Losses so that they re able to appropriately record them as components of their Pension Expenses.