Dawson plc amends its defined pension plan on January 1, 2012, resulting in £520,000 of past service cost.The company has 600 active employees, of which 120 vest immediately (20%) and the other 480 (80%) vest in three years.The unrecognized past service cost applicable to the vested employees is £104,000 and vests immediately.The unrecognized past service cost related to the unvested employees is £416,000 and is amortized over five years.After reporting amortization of past service costs in 2012, what is the ending amount of unrecognized PSC?

Question

Quizplus · Accepted Answer

The unrecognized past service cost for unvested employees is £416,000. Amortizing this over five years results in an annual amortization of £83,200 (£416,000/5). After one year, the unrecognized PSC is £416,000 - £83,200 = £332,800. Adding the unrecognized PSC for vested employees (£104,000), the total unrecognized PSC is £332,800 + £104,000 = £436,800.

Dawson Plc Amends Its Defined Pension Plan on January 1