Regarding Prior Service Cost Amortization, what is the increase or decrease to P

Question

Regarding Prior Service Cost Amortization, what is the increase or decrease to Pension Expense on the Fox Co. Defined Benefit Plan Worksheet for 2019, based on the following info? Pension data for the 2019 calendar year: Service Cost $ 70,000 Actual return on plan assets 9% Benefits to retirees 60,000 Expected return on plan assets 7% Cash contributions 50,000 Settlement rate 6% Fox's Beginning 2019 Info (December 31, 2018 balances): Plan Assets $ 700,000 Projected Benefit Obligation (PBO) 850,000 Accumulated net other comprehensive loss (average service life is 10 years) 175,000 Prior Service Cost (PSC-Fox uses years of service amortization method) 300,000 (This PSC is attributable to 80 employees who are expected to retire as follows: 10 retire in 2 years, 15 in 3 years, 20 in 4 years, and 35 in 5 years)

Explanation / Answer

Amortization of prior service cost is based on the beginning unrecognized prior service cost of $300000 divided by the average service life of 10 years =$30,000, which increases pension expense and reduces the amount of unrecognized prior service cost.

So answer is $30,000 increase

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