Question

Pension data for Manu Services Inc. include the following: Discount rate Expected return on plan assets 8% Actual return on plan assets 19% Service cost, 2016 Accumulated benefit obligation 1/1/16 Projected benefit obligation 1/1/16 Plan assets (fair value) 1/1/16 Prior service cost AOCI 1/1/16 Netloss AOCI 1/1/16 2016 Cash contributions to pension fund 2016 Benefit payments to retirees 258,400 1,746,380 2,394,990 2,520,610 305,815 268.050 274.402 253.601 On average, employees' remaining service life with the company is 10 years When recording the pension expense for 2016 for Manu, Pension Expense will be debited for $ rule) (Do not use the corridor

Answer 1

Answer -

Calculation of Pension Expense

	Particulars	Explanation	Amount ($)
I.	Service cost	Given in question	258400
II.	Interest cost	Projected benefit obligation * Discount rate = $2394990 * 7%	167649
III.	Expected return on assets	(Plan assets * Actual return on plan assets) - [(Plan assets * Actual return on plan assets) - (Plan assets * Expected return on plan assets)] = ($2520610 * 9%) - [($2520610 * 9%) - ($2520610 * 8%)]	201649
IV.	Amortization of net loss	-	0
V.	Amortization of prior service cost	-	0
Pension expense		(I + II) - III	224400

When recording the pension expense for 2016 for Manu, Pension Expense will be debited for $224400.