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23 July, 08:17

The following information is related to the defined benefit pension plan of Dreamworld Company for the year: Service cost $ 61,000 Contributions to pension plan 111,000 Benefits paid to retirees 156,000 Plan assets (fair value), January 1 643,000 Plan assets (fair value), December 31 750,000 Actual return on plan assets 152,000 PBO, January 1 910,000 PBO, December 31 906,000 Discount rate 10 % Long-term expected return on plan assets 9 % Assuming no other relevant data exist, what is the pension expense for the year?

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  1. 23 July, 08:50
    0
    The pension expense for the year is $94,130

    Explanation:

    The computation of the pension expense is shown below:

    = Service cost + Interest cost - expected return of plant

    where,

    Service cost = $61,000

    Interest cost = PBO, January 1 * discount rate

    = $910,000 * 10%

    = $91,000

    Expected return on plant asset = Plan assets (fair value), January 1 * Long-term expected return on plan assets

    = $643,000 * 9%

    = $57,870

    Now put these values to the above formula

    So, the value would equal to

    = $61,000 + $91,000 - $57,870

    = $94,130
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