Pension data for Millington Enterprises include the following: ($ in millions) D

Question

Pension data for Millington Enterprises include the following: ($ in millions) Discount rate, 10% Projected benefit obligation, January 1 Projected benefit obligation, December 31 Accumulated benefit obligation, January 1 Accumulated benefit obligation, December 31 Cash contributions to pension fund, December 31 Benefit payments to retirees, December 31 $360 465 300 415 150 54 Required: Assuming no change in actuarial assumptions and estimates, determine the service cost component of pension expense for the year ended December 31

Explanation / Answer

SOLUTION

Service cost = PBO end of the year - PBO Beginning of year - Interest Cost + Retiree benefit

= $465 - $360 - $36 + $54

= $123 million

* Interest Cost = $360 * 10% = $36

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