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Question 9
Information about a postretirement benefit plan at the beginning
of the current year is as follows (in millions). EPBO,
$400Discount rate, 5%Average years of service rendered toward
full eligibility, 12Average years of service required to reach full
eligibility, 20Plan assets, $120Expected and actual return, 10%.
Compute the reported postretirement benefit liability at year-end.
Question 10
The balance in the capitalized natural resources deposit account
immediately before beginning removal operations is $110,000.
The date is January 1 of the current (first) year. The firm is then
informed that to comply with environmental regulations, the site
will require reclamation work in four years costing an estimated
$30,000 at that time. 5% is the appropriate risk adjusted rate of
return. One-fourth the total estimated resource in the site was
removed in the first year and was sold for $70,000. Compute the
increase in net income for the current year from operating the
site. Ignore income taxes. The present value of $1 four years
hence at 5% is .8227.
Question 11
A stock option award was granted at the beginning of the current
year (1/1/x4) to three managers. The total shares granted are
30,000 (10,000 each). The option price and market price of the $2
par common stock on the grant date was $6. The options vest Dec.
31, 20x7. Applying an option pricing model yielded a fair value of
$1 per option. Assume all of the options were exercised when the
stock price was $10. What amount of compensation expense in
total is recognized over the service period and by what amount is
the firm's net assets increased as a result of the option award.