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PolarNik [594]
3 years ago
5

On January 1, 2021, Gillock Climbing Academy instituted a defined benefit pension plan for its employees. The annual service cos

t for each year of 2021 and 2022 was $600,000. The interest rate used to determine the projected benefit obligation is 10%. Both the actual and the expected return on plan assets are 8% for both years. Gillock funded the plan in the amount of $400,000 each January 1, beginning on January 1, 2021.
Business
1 answer:
Inessa05 [86]3 years ago
4 0

Answer:

The answer is $593,440.

Explanation:

Service cost = $600,000

Less: Expected return on plan assets (W1) = ($66,560)

Pension expense for the year 2022 = $593,440

Working (W1):

Funding on 1st January 2021 = $400,000

Add: actual return on 31 December 2021 = $400,000×8% = $32,000

Balance of plan assets on 31 December, 2021 = $432,000

Add: Current funding on 1st January 2022 = $400,000

Balance of plan assets on 1st January 2022 = $832,000

Balance of plan assets on 31st December 2022 = $832,000×8% = $66,560

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Answer:

Optimal package size = 4 units

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