Question

The projected benefit obligation was $260 million at the beginning of the year. Service cost for the year was $30 million. At the end of the year, pension benefits paid by the trustee were $16 million and there were no pension-related other comprehensive income accounts requiring amortization. The actuaries discount rate was 5%. The actual return on plan assets was $15 million although it was expected to be only $14 million. What was the pension expense for the year

Answer 1

Answer:

The pension expense for the year is $29 million.

Explanation:      

The expense is arrived by adding service of cost to interest cost less expected return on plan assets.Thereafter,amortization of prior service cost is deducted   as shown below:                                                      

Service Cost                                                                    $30  

Interest Cost ($260 million*5%)                                     $13

Expected return on plan assets ($15 actual, $1 Gain)($14 )

Amortization of prior service cost                                0

Amortization of net loss (gain)                                       0

Pension Expense                                                               $29