Question

In: Accounting

For Oxford Corporation, year-end plan assets were $3,000,000. At the beginning of the year, plan assets...

For Oxford Corporation, year-end plan assets were $3,000,000. At the beginning of the year, plan assets were $2,450,000. During the year, contributions to the fund were $180,000 and benefits paid were $110,000. Compute Oxford's actual return on plan assets.

Select one:

a. $260,000

b. $350,000

c. $480,000

d. $550,000

e. $840,000

Expert Solution

Answer is (c) = $480,000.

Reason:

Opening Balance + Contributions to the fund + Return on Plan Assets - Benefits paid = Closing Balance of Plan Assets.

Let return on plan assets be x.

Inserting the amounts in the formula given above,

$2,450,000 + $180,000 + x - $110,000 = $3,000,000

$2,520,000 + x = $3,000,000

x = $3,000,000 - $2,520,000

x = $480,000

Therefore, the actual return on the plan assets is $480,000.

Note: Actuarial gain/(loss) has not been given in the question hence it is not considered.

All other options are incorrect as we did not get those amounts through the above mentioned calculation.

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