Answer:
Warren’s actual return on plan assets is $219,908
Explanation:
Year-end plan assets = plan assets at the beginning of the year x (1+ rate of investment) + benefits paid - contributions to the pension fund
⇔ $2,000,000 = $1,780,000 *(1+ rate) + $200,000 - $120,000
⇔ 1,920,000 = 1,780,000* (1 +rate)
-> rate = 1,920,000 / 1,780,000 - 1 = 7.86%
The interest on this investment = plan assets at the beginning of the year x rate of investment
= $1,780,000 * 7.86% = $139,908
Actual return on plan assets = interest on investment + benefits paid - contributions to the pension fund
= $139,908 + $200,000 - $120,000 = $219,908
