Water Inc. has the following balances at 1/1/10 that relate to its defined-benef
ID: 2335021 • Letter: W
Question
Water Inc. has the following balances at 1/1/10 that relate to its defined-benefit pension plan:
Plan Assets
$800,000
Net Pension Asset
100,000
Accumulated OCI (PSC)
120,000
During 2010, the following additional data is available:
Service Cost for 2010
$75,000
Settlement rate
20%
Actual return on plan assets in 2010
65,000
Amortization of prior service cost
10,000
Expected return on plan assets
60,000
Unexpected loss from change in projected benefit obligation, due to change in actuarial predictions
65,000
Contributions in 2010
90,000
Benefits paid to retirees in 2010
75,000
Required: Compute pension expense for the year 2010
Plan Assets
$800,000
Net Pension Asset
100,000
Accumulated OCI (PSC)
120,000
Explanation / Answer
Pension expense:
Service cost............... ....................... 75000
Actual return.................................... (65000)
Unexpected gain (65000-60000)......5000
Amortization of prior service cost... 10000
Pension expense...............................25000
(In 2010, there is no interest cost included in pension expense because there was no projected benefit obligation at the beginning of the year)
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