Rodeo Corporation amended its defined benefit pension plan on January 31, 2018,

Question

Rodeo Corporation amended its defined benefit pension plan on January 31, 2018, to increase retirement benefits earned with each service year. The actuary estimated the prior service cost to be $216,000. Rodeo's 80 present employees are expected to retire at the rate of about 10 each year at the end of each of the next eight years beginning on December 31, 2018.

Required:
Using the service method, calculate the amount of prior service cost to be amortized to pension expense in each of the next eight years.

2018 ____

2019____

2020____

2021____

2022____

2023____

2024____

2025____

TOTAL ____

Explanation / Answer

Year No. of Employee Fraction Prior service cost Amount amortized 2018 80 80/360 $216,000 $48,000 2019 70 70/360 216,000 42,000 2020 60 60/360 216,000 36,000 2021 50 50/360 216,000 30,000 2022 40 40/360 216,000 24,000 2023 30 30/360 216,000 18,000 2024 20 20/360 216,000 12,000 2025 10 10/360 216,000 6,000 Total 360 $216,000

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