Question

Sandhill, Inc. has a defined-benefit pension plan covering its 50 employees. Sandhill agrees to amend its pension benefits. As a result, the projected benefit obligation increased by $3060000. Sandhill determined that all its employees are expected to receive benefits under the plan over the next 5 years. In addition, 10 employees are expected to retire or quit each year. Assuming that Sandhill uses the years-of-service method of amortization for prior service cost, the amount reported as amortization of prior service cost in year one after the amendment is $1020000. $714000. $612000. $204000. Save for Later

Answer 1

Answer:

$1020000

Explanation:

Calculation to determine what amount to be reported as amortization of prior service cost in year one after the amendment is

First step is to calculate the employees 5years Expected benefits

Expected benefits =50+40+30+20+10

Expected benefits =150

Now let calculate the amortization of prior service cost in year one

Amortization of prior service cost=($3060000/150)*50

Amortization of prior service cost=20,400 *50

Amortization of prior service cost=$1020000

Therefore the amount to be reported as amortization of prior service cost in year one after the amendment is $1020000