Question

Crane, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2018. Service cost $ 225000 Contributions to the plan 210000 Actual return on plan assets 150000 Projected benefit obligation (beginning of year) 3000000 Fair value of plan assets (beginning of year) 1800000 The expected return on plan assets and the settlement rate were both 11%. The amount of pension expense reported for 2018 is a. $555000. b. $357000. c. $225000. d. $153000.

Answer 1

Answer:

b. $357000

Explanation:

The computation of the amount of pension expense reported for 2018 is shown below:

= Service cost + Projected benefit obligation × settlement rate - fair value of plan assets  × settlement rate

= $225,000 + $3,000,000 × 11% - $1,800,000 × 11%

= $225,000 + $330,000 - $198,000

= $357,000

Basically we added the projected benefit obligation and deduct the fair value of plan asset after considering the settlement rate to the service cost