Question - The following year-end information is for the pension plan for the employees of Ortiz Motors, Inc.
12/31/11 12/31/12
Accumulated benefit obligation $2,800,000 $3,760,000
Projected benefit obligation 3,040,000 4,000,000
Fair value of plan assets 3,080,000 3,520,000
AOCI - Net (gain) or loss (425,000) (480,000)
Actual return on plan assets in 2012: $200,000
Actuary's discount rate 8% 8%
Expected rate of return on assets 7% 6%
Ortiz estimates that the average remaining service life is 15 years. Ortiz Motor's contribution to the pension fund was $520,000 in 2012 and benefits paid to retirees that year were $280,000.
(i) Calculate the interest cost for 2012.
(ii) Calculate the unexpected gain or loss in 2012.
(iii) Calculate the amortization of the net gain for 2012 using the corridor method.