Capsule Corp. has a Projected Benefit Obligation(PBO) balance of $47,000 and a balance in plan assets...
Capsule Corp. has a Projected Benefit Obligation(PBO) balance of $47,000 and a balance in plan assets of $44,000 at the beginning of the year. Because of recent unexpected excessive returns on its investments of plan assets, its net pension gain in accumulated other comprehensive income totaled $8,000. The average remaining service period of Capsule's employees is 15 years.
Before considering the possible amortization of this net gain, Capsule's pension expense is $11,000.
How much total pension expense will Capsule record this year?
Question 1 options:
| A. |
$10,760 |
| B. |
$14,300 |
| C. |
$10,780 |
| D. |
$7,700 |
Homework Answers
| Amortization of net pension gain | ||
| Amount $ | ||
| Net pension gain -Accumulated OCI | 8,000 | |
| Less: 10% of Higher of Beginning PBO or Plan assets | 4,700 | 10% of higher of 47,000 or 44,000 |
| Remaining amount | 3,300 | |
| / Average remaining service period | 15 | |
| Amortization of this net gain | 220 | |
| Total pension expense Capsule will record this year | $ 10,780 | =11000-220 |
| ( Capsule's pension expense before amortization - amortization of net gain ) | ||
| Correct answer is option C . | ||
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