Question

Recall that Elm City reported the following information pertaining to its pensions for fiscal year 2014, based on GASB standards applicable to the employer.

Net Pension Obligation (NPO), 1-1-14 (arising from prior contribution deficiencies): $2,800,000
Annual Required Contribution (ARC): $6,000,000
Actual contribution for FY 2014: $5,700,000
Discounted present value of NPA, 1-1-14: $152,000
The city's net pension obligation as of 12-31-14 is:
A) $3,172,000.
B) $3,100,000.
C) $2,592,000.
D) Some other amount.

Answer 1

The net pension obligation as of 12-31-14 for Elm City is $3,120,000.

Step-by-step explanation:

The net pension obligation as of 12-31-14 for Elm City can be calculated using the following formula:

Net Pension Obligation (NPO) = NPO on 1-1-14 + ARC - Actual contribution for FY 2014 - Discounted present value of NPA on 1-1-14

Substituting the given values:

NPO = $2,800,000 + $6,000,000 - $5,700,000 - $152,000 = $3,120,000

Therefore, the city's net pension obligation as of 12-31-14 is $3,120,000. The correct answer is option D) Some other amount.