Clarkson Co.provides the following information about its Pension plan for the year 2012.
Based on this information, what is the Pension expense for 2012?

Question

Quizplus · Accepted Answer

To calculate the pension expense for 2012, we need to calculate the service cost, interest cost, expected return on plan assets, amortization of prior service cost and gain/loss, and the net settlement expense.

Service cost = $150,000 
Interest cost = ($1,200,000 x 8%) = $96,000 
Expected return on plan assets = ($2,000,000 x 7%) = $140,000 
Amortization of prior service cost = $0 
Amortization of gain/loss = ($50,000 - $20,000)/15 = $2,000 
Net settlement expense = $0

Therefore, Pension expense = Service cost + Interest cost - Expected return on plan assets + Amortization of prior service cost + Amortization of gain/loss + Net settlement expense 
Pension expense = $150,000 + $96,000 - $140,000 + $0 + $2,000 + $0 
Pension expense = $108,000

The closest answer choice is D) $103,900.