Scallion Company received the following reports of its defined benefit pension plan for the current calendar year: PBO Plan assets Balance, January 1 $ 460,000 Balance, January 1 $ 256,000 Service cost 193,000 Actual return 39,000 Interest cost 31,000 Annual contribution 111,000 Benefits paid (83,000) Benefits paid (83,000) Balance, December 31 $ 601,000 Balance, December 31 $ 323,000 The long-term expected rate of return on plan assets is 10%. Assuming no other data are relevant, what is the pension expense for the year?

Question

Business

Gianna Lewis

24 August, 08:40

Scallion Company received the following reports of its defined benefit pension plan for the current calendar year: PBO Plan assets Balance, January 1 $ 460,000 Balance, January 1 $ 256,000 Service cost 193,000 Actual return 39,000 Interest cost 31,000 Annual contribution 111,000 Benefits paid (83,000) Benefits paid (83,000) Balance, December 31 $ 601,000 Balance, December 31 $ 323,000 The long-term expected rate of return on plan assets is 10%. Assuming no other data are relevant, what is the pension expense for the year?

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Ali Peterson · Answer 1

The pension expense for the year is 198,400

Explanation:

According to the reports received by the company we have the following relevant data to calculate the pension expense for the year:

Service cost of $ 193,000

Interest cost of $ 31,000

Considering that the long-term expected rate of return on plan assets is 10%, then $ 256,000*10% = 25,600

Pension expense for the year = Service cost of $ 193,000 + Interest cost of $ 31,000-25,600 = 198,400.