Answer:
Amount of pension expense for 2021 is $816,000.
Explanation:
Note: The data in the question are merged together and they therefore sorted before answering the question. The complete question with the sorted data is therefore given as follows:
Barton, Inc. received the following information from its pension plan trustee concerning the operation of the company's defined-benefit pension plan for the year ended December 31, 2021.
January 1, 2021 December 31, 2021
Fair value of pension plan assets $5,600,000 $6,000,000
Projected benefit obligation 6,400,000 6,880,000
Accumulated benefit obligation 1,120,000 1,360,000
Accumulated OCI - (Gains / Losses) -0- (120,000)
The service cost component of pension expense for 2021 is $600,000 and the amortization of prior service cost due to an increase in benefits is $80,000. The settlement rate is 10% and the expected and actual rates of return are 9%. What is the amount of pension expense for 2021?
The explanation to the answer is now given as follows:
The amount of pension expense for 2021 can be calculated using the following formula:
Amount of pension expense for 2021 = Service cost component of pension expense for 2021 + Amortization of prior service cost due to an increase in benefits + (Projected benefit obligation on January 1, 2021 * Settlement rate) - (Fair value of pension plan assets on January 1, 2021 * Rates of return) ....................... (1)
Where;
Service cost component of pension expense for 2021 = $600,000
Amortization of prior service cost due to an increase in benefits = $80,000
Projected benefit obligation on January 1, 2021 = $6,400,000
Settlement rate = 10%
Fair value of pension plan assets on January 1, 2021 = $5,600,000
Rates of return = 9%
Substituting the values into equation (1), we have:
Amount of pension expense for 2021 = $600,000 + $80,000 +($6,400,000 * 10%) - ($5,600,000 * 9%)
Amount of pension expense for 2021 = $816,000
