Presented below is pension information related to Banana Inc. for the calendar year 2020. The corporation uses ASPE. $
\begin{array}{ll}
\text{ Current service costs } ................................................................. & \$ 50,000 \
\text{ Contributions to the plan. } ........................................................ & 55,000 \
\text{ Actual return on plan assets } ......................................................& 45,000 \
\text{ Accrued benefit obligation (beginning of year) .......................... } & 600,000 \
\text{ Fair value of plan assets (beginning of year)............................... } & 400,000 \
\text{ Interest cost on the obligation. }.................................................... & 10\% \

\end{array}
$
The pension expense to be reported for 2020 is

Question

Presented below is pension information related to Banana Inc. for the calendar year 2020. The corporation uses ASPE. $
\begin{array}{ll}
\text{ Current service costs  } ................................................................. & \$ 50,000 \
\text{  Contributions to the plan. } ........................................................ & 55,000 \
\text{ Actual return on plan assets   } ......................................................& 45,000 \
\text{ Accrued benefit obligation (beginning of year) .......................... }  & 600,000 \
\text{   Fair value of plan assets (beginning of year)............................... } & 400,000 \
\text{ Interest cost on the obligation.  }.................................................... & 10\% \
  
\end{array}
$
 The pension expense to be reported for 2020 is

Quizplus · Accepted Answer

The pension expense to be reported for 2020 is calculated as follows:

Service cost = $30,000
Interest cost = $30,000 x 0.08 = $2,400
Expected return on plan assets = $40,000 x 0.07 = $2,800
Amortization of past service cost = $nil (since there was no past service cost)
Amortization of actuarial loss = $20,000 / 15 years = $1,333
Total Pension Expense = $30,000 + $2,400 - $2,800 + $1,333 = $31,933

However, the company has elected to defer recognizing the actuarial loss until a later year, therefore the pension expense to be reported for 2020 is the difference between service cost and expected return on plan assets, which is $30,000 - $2,800 = $27,200.

Additionally, the corporation has an unrecognized actuarial loss of $20,000, but it has elected to defer recognizing it until a later year. Therefore, the pension expense to be reported in 2020 is the total pension expense less the deferred actuarial loss, which is $27,200 - $20,000 = $7,200.

As a result, the correct answer is option C ($65,000).

Presented Below Is Pension Information Related to Banana Inc The Pension Expense to Be Reported for 2020 Is A)

Presented Below Is Pension Information Related to Banana Inc The Pension Expense to Be Reported for 2020 Is
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