Babcock Company received the following reports of its defined benefit pension plan for the current calendar year:

Babcock Company received the following reports of its defined benefit pension plan for the current calendar year: 19 PBO Balance, January 1 Service cost Interest cost Benefits paid Balance, December 31 Plan assets $610,000 Balance, January 1 361,000 Actual return 70,000 Annual contribution (90,000) Benefits paid $951,000 Balance, December 31 $550,000 55,000 222,000 (90,000) $ 737,000 The long-term expected rate of return on plan assets is 8%. Assuming no other data are relevant, what is the pension expense for the year? Multiple Choice $431,000. $376,000. O $361,000. O $387,000.

Solutions

Expert Solution

Solution:

The pension expense for the year is :$387,000

Explanation:

Service cost = 361,000

interest cost = 70,000

Expected rate of return = 8% on plan assets = 550,000 x 8% = 44,000

Pension expense

= (Service cost + interest cost - Expected rate of return )

= (361000 + 70000 - 44000)

= $387,000

Pension expense is : $387,000

S Mahalaxmi answered 2 years ago

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