Blaine Inc. shows the following data relating to its pension plan for 2011:

What amount should Blaine report for pension expense in 2011?

Question

Blaine Inc. shows the following data relating to its pension plan for 2011:

What amount should Blaine report for pension expense in 2011?

Quizplus · Accepted Answer

The pension expense for 2011 is the sum of service cost, interest cost, expected return on plan assets, amortization of unrecognized prior service cost, and amortization of unrecognized net loss.

Service cost = 20,000 
Interest cost = (560,000 × 8%) = 44,800 
Expected return on plan assets = (640,000 × 7%) = (44,800) 
Amortization of unrecognized prior service cost = (110,000 ÷ 20) = 5,500 
Amortization of unrecognized net loss = [(870,000 - 625,000) ÷ 20] = 12,250

Therefore, pension expense for 2011 = 20,000 + 44,800 - 44,800 + 5,500 + 12,250 = $242,000.