Question

Fox Company received the following reports of its defined benefit pension plan for the current calendar year: PBO Balance, January 1 Service cost Interest cost Benefits paid Balance, December 31 Plan assets $ 690,000 Balance, January 1 365,000 Actual return 69,000 Annual contribution (94,000) Benefits paid $1,030,000 Balance, December 31 $ 560,000 52,000 226,000 (94,000) $ 744,000 The long-term expected rate of return on plan assets is 8%. Assuming no other data are relevant, what is the pension expense for the year?

Answer 1

Answer:

Pension expense

389,200

Calculation:

To calculate the pension expense, we need to add the service and interest cost together and then deduct the expected return on plan assets.

The service cost for PBO is provided in the question which is 365,000. And the interest cost for PBO is 69,000.

The Expected return rate on plan assets is 8% and the plan assets at beginning is 560,000.

So the Expected return on plan assets = 560,000 x 8% = 44,800

The pension expense calculation is done below:

Service cost	365,000
Interest cost	69,000
Expected return on plan assets	(44,800)
Pension expense	389,200