Scallion Company received the following reports on its defined benefit pension plan for the current calendar year: The long-term expected rate of return on plan assets is 10%. Assuming no other data are relevant, what is the pension expense for the year?

Question

Quizplus · Accepted Answer

The pension expense is calculated by adding the service cost, interest cost, expected return on plan assets, amortization of prior service cost, and amortization of net loss or gain. In this case, we only have information about the expected rate of return on plan assets, which is 10%. Therefore, we can use that information to calculate the expected return component of pension expense. The expected return component is calculated by multiplying the beginning-of-year plan assets balance by the expected rate of return. We do not know the beginning-of-year plan assets balance, but we can use the average of beginning-of-year and end-of-year balances, which is $2,020,000. Therefore, the expected return component is $202,000 (=$2,020,000 x 10%). Therefore, the correct answer is (D) $202,000.

Scallion Company Received the Following Reports on Its Defined Benefit