Question

Coronado Company sponsors a defined benefit pension plan. The following information related to the pension plan is available for 2020 and 2021.

		2020			2021
Plan assets (fair value), December 31		$733,950			$891,450
Projected benefit obligation, January 1		735,000			840,000
Pension asset/liability, January 1		147,000	Cr.		?
Prior service cost, January 1		262,500			252,000
Service cost		63,000			94,500
Actual and expected return on plan assets		25,200			31,500
Amortization of prior service cost		10,500			12,600
Contributions (funding)		120,750			126,000
Accumulated benefit obligation, December 31		525,000			577,500
Interest/settlement rate		10	%		10	%

Compute pension expense for 2020 and 2021.

Pension expense for 2020		$
Pension expense for 2021		$

Answer 1

Pension expenses are regular expenses incurred by employer in the name of employee and paid to employee at the end of their service. Pension expenses are accumulated in pension funds which are invested to earn benefit to the employees.

Particulars	2020	2021
service cost	$63,000	$94,500
Add: interest at 10% of PBO	$73,500	$84,000
Less: expected return on plan assets	($25,200)	($31,500)
Add: prior service cost amortization	$10,500	$12,600
Pension expense for the year	$121,800	$159,600

Here, PBO is projected benefit obligation i.e. 735,000 for 2020 and 840,000 for 2021.

Pension expense for 2020 = $ 121,800

Pension expense for 2021 =$ 159,600