Fox 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 8%. Assuming no other data are relevant, what is the pension expense for the year?

Question

Quizplus · Accepted Answer

The pension expense is calculated as the sum of the service cost, interest cost, and expected return on plan assets. The service cost is not provided, so we cannot calculate the pension expense. However, we can calculate the interest cost and expected return on plan assets. The interest cost is calculated as the current balance of the pension obligation multiplied by the discount rate. The expected return on plan assets is calculated as the current balance of plan assets multiplied by the expected rate of return. The interest cost is $360,000 ($9,000,000 x 8%) and the expected return on plan assets is $720,000 ($9,000,000 x 8%). Therefore, the pension expense is $360,000.

Fox Company Received the Following Reports on Its Defined Benefit