Question

The following information is related to the defined benefit pension plan of Simpson Company for the year:

Service cost	$	92,000
Contributions to pension plan		143,000
Benefits paid to retirees		119,000
Plan assets (fair value), January 1		548,000
Plan assets (fair value), December 31		661,000
Actual return on plan assets		89,000
PBO, January 1		835,000
PBO, December 31		891,500
Discount rate		10	%
Long-term expected return on plan assets		9	%

Assuming no other relevant data exist, what is the pension expense for the year?

• $126,180.

• $51,000.

• $121,680.

• $92,000.

Answer 1

Ans. Option A $126,180

Service cost. $92,000

Add: Interest cost. $83,500

Less: Expected return on plan assets. -$49,320

Pension expenses. $126,180

Calculations:

Interest cost = PBO January 1 * Discount rate

= $835,000 * 10%

=. $83,500

Expected return on plan assets = Plan assets (fair value) January 1 * Long term expected return on plan assets

= $548,000 * 9%

= $49,320