Question

g The following information pertains to Lee Corp.'s defined benefit pension plan for year 2: Service cost $160,000 Actual and expected gain on plan assets 35,000 Unexpected loss on plan assets related to a year 1 disposal of a subsidiary 40,000 Amortization of unrecognized prior service cost 5,000 Annual interest on pension obligation 50,000 What amount should Lee report as pension cost in its year 2 income statement

Answer 1

Answer:

$180,000

Explanation:

Calculation for the amount that Lee should report as pension cost in its year 2 income statement

Using this formula

Pension cost =Service cost-Actual and expected return on plan assets+Prior service cost amortization+Interest cost

Let plug in the formula

Pension cost =$160,000 – $35,000 + $5,000 + $50,000

Pension cost =$180,000

Therefore the amount that Lee should report as pension cost in its year 2 income statement will be $180,000