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.

Business & Finance Assignment Help: Calculating Pensions| Business & Finance homework help

Gibbs Company can create a schedule that reflects how much net loss or gain the company will amortize as part of its pension expenses for 2014, 2015. and 2016. Calculated by subtracting the unrecognized gain or loss from previous periods and the difference between planned benefit obligation (PBO), and fair value plan assets (FVPA).

PBO in 2014 was $2,100,000. FVPA for the same period was $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). They must therefore amortize the underfunded liability in their 2014 pension expenses.

PBO in 2015 is 2 460 000, while FVPA was $2 340 000. The net result is a surplus of 120 000 dollars ($2460000 -$2340000). This is because there was a previous underfunded position in 2014. It must be considered before deciding how to handle this positive balance. In other words, if you subtract 420000 from 120000 you arrive at 30000 as the remaining amount due to recognized gains and losses.

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 .
These three years show how tracking current-year factors, such as FVPO vs PBO along with previously unrecorded gains and losses helps calculate Net Gains/Losses accurately so they can record them appropriately as components of pension expenses.