Question

The following information pertains to Lee Corp.'s defined benefit pension plan for year 2:Service cost $160,000Actual and expected gain on plan assets 35,000Unexpected loss on plan assets related to a year 1 disposal of a subsidiary 40,000Amortization of unrecognized prior service cost 5,000Annual interest on pension obligation 50,000What amount should Lee report as pension cost in its year 2 income statement?

Answer 1

Answer:

$180,000

Explanation:

This can be calculated as follows:

Pension cost in year 2 = Service cost + Prior service cost amortization + Interest cost - Actual and expected return on plan assets

Therefore, we have:

Pension cost in year 2 = $160,000 + $5,000 + $50,000 - $35,000 = $180,000

Therefore, Lee report should $180,000 as pension cost in its year 2 income statement.