Question

Whitemarsh,Inc. received the following information from its pension plan trustee concerning the operation of the company's defined-benefit pension plan for the year ended December 31, 2021. 1/1/21 12/31/21 Accumulated benefit obligation $3,500,000 $1,610,000 Net (gains) and losses 1,400,000 140,000 Projected benefit obligation 6,650,000 6,860,000 Pension assets (at fair value) 3,500,000 4,025,000 The service cost component of pension expense for 2021 is $520,000 and the amortization of prior service cost due to an increase in benefits is $105,000. The settlement rate is 10% and the expected rate of return is 8%. What is the pension expense for 2021?

Please consider the new tax law and add all explanations possible. Thank you

Answer 1

Ans: $1,010,000 Calculate pernsion expense for 2021 as shown below: Workings Particulars Amount Service cost Add: Amorized prior service expense Add: Settlement amount Less: Expected return Pension expense for 2021 $520,000 $105,000 $665,000 (S6,650,000*10%) $280,000 (S3,500,000*8%) $1,010,000