Question

The following information is related to the defined benefit pension plan of Dreamworld Company for the year: Service cost $ 61,000 Contributions to pension plan 111,000 Benefits paid to retirees 156,000 Plan assets (fair value), January 1 643,000 Plan assets (fair value), December 31 750,000 Actual return on plan assets 152,000 PBO, January 1 910,000 PBO, December 31 906,000 Discount rate 10 % Long-term expected return on plan assets 9 % Assuming no other relevant data exist, what is the pension expense for the year?

Answer 1

Answer:

The pension expense for the year is $94,130

Explanation:

The computation of the pension expense is shown below:

= Service cost + Interest cost - expected return of plant

where,

Service cost = $61,000

Interest cost = PBO, January 1 × discount rate

                     = $910,000 × 10%

                     = $91,000

Expected return on plant asset = Plan assets (fair value), January 1 × Long-term expected return on plan assets

= $643,000 × 9%

= $57,870

Now put these values to the above formula  

So, the value would equal to

= $61,000 + $91,000 - $57,870

= $94,130