Question

On January 1, 2021, Gillock Climbing Academy instituted a defined benefit pension plan for its employees....

On January 1, 2021, Gillock Climbing Academy instituted a defined benefit pension plan for its employees. The annual service cost for each year of 2021 and 2022 was $600,000. The interest rate used to determine the projected benefit obligation is 10%. Both the actual and the expected return on plan assets are 8% for both years. Gillock funded the plan in the amount of $400,000 each January 1, beginning on January 1, 2021.

What amount of pension expense should Gillock report in its income statement for the year ended December 31, 2022?

Multiple Choice

  • $593,440.

  • $600,000.

  • $628,000.

  • $726,560

Business   Accounting   
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Homework Answers

Answer #1

Answer: $628,000

Explanation

Pension Expense
$  
Service Cost              600,000.00
Interest cost (600,000 x 10%)               60,000.00
Expected return on assets (400,000 x 8%)              (32,000.00)
Pension Expense              628,000.00
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