Question

Windsor, Inc. received the following information from its pension plan trustee concerning the operation of the company's defined-benefit pension plan for the year ended December 31, 2021. 1/1/21 12/31/21 Accumulated benefit obligation $3,500,000 $1,610,000 Net (gains) and losses 1,400,000 140,000 Projected benefit obligation 6,650,000 6,860,000 Pension assets (at fair value) 3,500,000 4,025,000 The service cost component of pension expense for 2021 is $520,000 and the amortization of prior service cost due to an increase in benefits is $105,000. The settlement rate is 10% and the expected rate of return is 8%. What is the amount of pension expense for 2021

Answer 1

Answer:

$1,010,000

Explanation:

                 Calculation of Pension Expenses

Particulars                                                     Amount

Service cost                                                  $520,000

Add: Amortized prior service expenses     $105,000

Add: Settlement amount                             ($665,000) ($6,650,000*10%)

Less: Expected return                                 ($280,000) ($3,500,000*8%)

Pension Expense for 2021                         $1,010,000