Question

Splish Company provides the following information about its defined benefit pension plan for the year 2017. Service cost $110,000 Contribution to the plan 104,000 Prior service cost amortization 10,000 Actual and expected return on plan assets 30,000 Benefits paid 37,000 Plan assets at January 1, 2017 624,000 Projected benefit obligation at January 1, 2017 728,000 Accumulated OCI (PSC) at January 1, 2017 165,000 Interest/discount (settlement) rate 5% Compute the pension expense for the year 2017. Pension Expense for 2017 should be:

Answer 1

Answer: $155,520

Explanation:

Pension Expense = Service Cost - Expected return on plan assets + Prior service cost amortization + Interest cost

Interest Cost

= Interest rate * Projected benefit obligation

= 0.09 * 728,000

= $65,520

Pension Expense = 110,000 - 30,000 + 10,000 + 65,520

= $155,520