Question

Bostonian Company provided the following information related to its defined benefit pension plan for 2017: PBO on 1/1 $ 2,500,000 Fair value of plan assets on 1/1 2,000,000 Service cost 120,000 Actual return on plan assets 320,000 Payments made to retirees on 12/31 100,000 Amortization of prior service cost 40,000 Recognized actuarial losses 50,000 Contributions made to plan at 12/31 80,000 Interest rate for discounting pension obligations 6 % Expected return on plan assets 8 % Required: What amount of pension expense should Bostonian report for 2017

Answer 1

Answer:

$200,000

Explanation:

The computation of the amount of pension expense is shown below:

= Service cost + interest cost - expected return + amortization + actuarial gain

= $120,000 + $2,500,000 × 6% - $2,000,000 × 8% + $40,000 + $50,000

= $120,000 + $150,000 - $160,000 + $40,000 + $50,000

= $200,000

Hence, the amount of pension expense is $200,000 and the same is to be considered