Question

Howard Corp. sponsors a defined-benefit pension plan for its employees. On january 1, 2011, the following balances are related to its defined-benefit pension plan: Plan assets (market-related value) 520,000 Projected benefit obligation 660,000 Pension assoliability 140,000 Prior service cost 60,000 UEGL - Loss 95,000 On December 31, 2011, the actuary provides the following additional data: Service cost for 2011 72,000 Actual return on plan assets in 2011 42,000 Amortization of prior service cost 8,000 Contributions in 2011 60,000 Benefits paid retirees in 2011 40,000 Settlement rate Expected return rate 9% Average remaining service life of active employees (years) 8% 6 On its 2011 Income Statement, reported pension expense should be $90,833 $89,570 $93,560 $87,580

Answer 1

solution

answer is option (a)

service cost = 72000

interest cost = 6,60,000*8%=52,800

expected return on plan assets=5,20,000*9%=46,800

amortised gains or losses= 4833

amortised prior service cost =8000

pension expense =72000+52800-46800+4833+8000

=90833

note amortised gains or losses

660000*10%=66000

UEGL LOSS = 95000

DIFFERENCE =95000-66000=29000

CORRIDOR AMORTISATION =29000 DIVIDED BY remaining service life (in years)

i.e =29000/6

=4833