Question 1 (of 22) 1. Fax Compeny recelved the following reports of its defined

ID: 2557878 • Letter: Q

Question

Question 1 (of 22) 1. Fax Compeny recelved the following reports of its defined benefit pension plan for the current calendar year Plan assets ??? Balance, January 1 Service cost Interest cost Benefits paid Balance, December 31 $670,000 Balance, January 1 $520,000 363,000 Actual return 225,000 (96,000) $702,000 69,000 Annual contribution 96,000) Benefits paid $1,006,000 Balance, December 31 The long-term expected rate of return on plan assets is 8%. Assuming no other data are relevant, what is the pension expense for the year? O $363000 O$390,400 O $432.000. O $379.000

Explanation / Answer

1) Solution: 390,400

Working:

Service cost

363,000

Interest cost

69,000

Expected return on plant assets

-41600

(520,000 * 8%)

Pension expense

390,400

2) Solution: An increase in the average life expectancy of employees

Explanation: The factors that are applied by an actuarial for determining a company's PBO include employee retirements, salary increases, mortality rates, plan participation, program rules. Thus an increase in the average life expectancy of employees leads to an increase in PBO