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 $ 310 Projected benefit obligation, December 31 490 Accumulated benefit obligation, January 1 325 Accumulated benefit obligation, December 31 440 Cash contributions to pension fund, December 31 175 Benefit payments to retirees, December 31 59

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

Projected benefit obligation, January 1 $310 Service cost X Interest cost = $310 x 10% $31 Loss (gain) on PBO $0 Less: Benefit payments to retirees, December 31 -$59 Projected benefit obligation, December 31 490 Service cost = $490 -310-31-0+59 $208 To Check Projected benefit obligation, January 1 $310 Service cost 208 Interest cost = $310 x 10% $31 Loss (gain) on PBO $0 Less: Benefit payments to retirees, December 31 -$59 Projected benefit obligation, December 31 $490

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