[kukuna2008]

from Ninja,

this topic is extremely challenge to me, I am thinking maybe give up on this one because even the explanation Doesn’t make any sense to me 🙁

Q1: As of December 31 of the current year, the accumulated postretirement benefit obligation and plan assets of a defined benefit postretirement plan sponsored by Crouse, Inc., were:

Accumulated postretirement benefit obligation $500,000

Plan assets at fair value 425,000

Transition obligation $ 75,000

========

Crouse elected to apply GAAP provisions for employers’ accounting for postretirement benefits other than pensions, in its financial statements for the current year ended December 31 and recognize the transition amount on a delayed basis as a component of net periodic postretirement benefit cost. The average remaining service period of active plan participants expected to receive benefits was estimated to be 10 years at the date of transition. Some participants’ estimated service periods are 25 years. To minimize an accrual for postretirement benefit cost, what amount of transition obligation should Crouse amortize?

the answer is 3750. using 75000/20. my question is where is the 20 years come from?

Q2: Wolf Co.’s grant of 30,000 stock appreciation rights enables key employees to receive cash equal to the difference between $20 and the market price of the stock on the date each right is exercised. The service period is 20X1 through 20X3, and the rights are exercisable in 20X4 and the following year. The market price of the stock was $25 and $28 on December 31, 20X1 and 20X2, respectively. Assuming that the fair value of the stock appreciation rights was $5 at December 31, 20X1, and $8 at December 31, 20X2, what amount should Wolf report as the liability under the stock appreciation rights plan in its December 31, 20X2, balance sheet?

The answer is 24k x (2/3) = 160K. My question is where do you get 2/3?

Thank you for all the help!

FAR - 83, 04/2015
AUD - 73, 86, 08/2015
REG - 75
BEC - 71, rematch in 04/2016