Redman Corporation is a publicly held company that supplies tourniquets to medical emergency centers.The company maintains a noncontributory defined benefit pension plan for its employees.The Redman's actuary has provided the following information for the year ended December 31,2014:

Prior contributions to the defined benefit pension plan equaled the amount of net periodic pension cost accrued for the previous year end.If no contributions have been made for 2014 pension cost,what amount should Redman report in its December 31,2014,balance sheet for accrued pension cost?

Question

Redman Corporation is a publicly held company that supplies tourniquets to medical emergency centers.The company maintains a noncontributory defined benefit pension plan for its employees.The Redman's actuary has provided the following information for the year ended December 31,2014:

Prior contributions to the defined benefit pension plan equaled the amount of net periodic pension cost accrued for the previous year end.If no contributions have been made for 2014 pension cost,what amount should Redman report in its December 31,2014,balance sheet for accrued pension cost?

Quizplus · Accepted Answer

The net periodic pension cost for 2014 is the sum of service cost, interest cost, and expected return on plan assets minus amortization of prior service cost and gain or loss. The total net periodic pension cost for 2014 is $446,000 ($220,000 + $126,000 + $100,000 - $24,000 - $76,000). Since no contributions have been made for 2014, the accrued pension cost for the year will be $242,000 ($446,000 - $204,000, the contribution made for the previous year). Therefore, the correct answer is B) $242,000.

Redman Corporation Is a Publicly Held Company That Supplies Tourniquets