Larkspur Toothpaste Company initiates a defined benefit pension plan for its 50
ID: 2510338 • Letter: L
Question
Larkspur Toothpaste Company initiates a defined benefit pension plan for its 50 employees on January 1, 2017. The insurance company which administers the pension plan provided the following selected information for the years 2017, 2018, and 2019 For Year Ended December 31 2018 2017 2019 Plan assets (fair value) $84,700$178,370 290,800 321,100 80,000 103,900 165,4 198,60 77,6 45,4 Accumulated benefit obligation Projected benefit obligation 60 Net (gain) loss (for purposes of corridor calculation) Employer's funding contribution (made at end of year) 50,0 60 There were no balances as of January 1, 2017, when the plan was initiated. The actual and expected return on plan assets was 10% over the 3-year period, but the settlement rate used to discount the company's pension obligation was 13% in 2017, 11% in 2018, and 8% in 2019, The service cost component of net periodic pension expense amounted to the following: 2017 $60,000; 2018, $84,700; and 2019, $118,100. The average remaining service life per employee is 12 years. No benefits were paid in 2017, $30,300 of benefits were paid in 2018, and $18,700 of benefits were paid in 2019 (all benefits paid at end of year) Calculate the amount of net periodic pension expense that the company would recognize in 2017, 2018, and 2019. (Round answers to 0 decimal places, e.g. 2,525.) ension expense for 201 ension expense for 201 ension expense for 201Explanation / Answer
1. Pension Expense for 2017:
Since there were no previous service cost, net gain, or loss, plan assets or any other projected Benefit Obligation (PBO) as on January 1, 2017.
The Pension expense for 2017 would consist of only service cost, which is $60,000.
2. Pension Expense for 2018:
Service Cost $84,700
Expected return on Plan Assets ($50,000 * 10%) ($5,000)
Interest on PBO ($60,000 * 11%) $6,600
Pension Expense for 2018 is = $86,300
3. Calculation for Pension expense 2019:
Calculation of Amortization of Net Gain or Loss
Particulars Amount Service Cost 118100 Expected return on Plan Assets (10% * 84700) (-8470) Interest on PBO ($198600 * 8%) 15,888 Amortisation of net gain or loss 4812 Pension Expense $130,330Related Questions
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