Question

Smith, Inc. has a pension plan with the following data available for 2018 and 2019:

2018 2019

Service cost $ 30,000 $ 34,000

Interest cost $ 18,000 $ 20,000

Actual return on plan assets $ 15,000 $ 21,600

Beginning of year plan assets    $ 200,000 $ 240,000

Discount rate 8 % 8 %

Expected return on plan assets 8 % 8 %

The adjustment to OCI for gain or loss from the return on plan assets for 2018 is:

Multiple Choice

A $0.

B $1,000 gain.

C$1,000 loss.

D unknown from information provided.

Answer 1

The correct answer is C$1,000 loss.

Explanation:

Expected return on plan assets (200,000 x 8%)	$16,000
Actual return on plan assets	$15,000
OCI – Loss	$1,000