Question

Pension data for Manu Services Inc. include the following:

Discount rate	8%
Expected return on plan assets	9%
Actual return on plan assets	10%
Service cost, 2016	225,650
Accumulated benefit obligation 1/1/16	1,590,100
Projected benefit obligation 1/1/16	2,468,070
Plan assets (fair value) 1/1/16	2,864,890
Prior service cost–AOCI 1/1/16	302,439
Net gain–AOCI 1/1/16	261,276
2016 Cash contributions to pension fund	320,380
2016 Benefit payments to retirees	274,275

On average, employees' remaining service life with the company is 10 years

When recording the pension expense for 2016 for Manu, Pension Expense will be debited for $_________ (Do not use the corridor rule)

Answer 1

	Particulars	Amount
	Service Cost	2,25,650
+	Interest cost (2,468,070 X 8%)	197445.6
-	Expectated rate of return (28,64,890 X 9%)	257840.1
+	Amortization of prior service cost (3,02,439 /10)	30243.9
+	Amortizaton of prior net loss (2,61,276 - (28,64,890 X9%))/10	343.59
	Total Pension Expense	1,95,843

Note- Since in question it is mentioned no corridor rule to be applied the expected return is taken into consideration for amotization of prior net loss instead of 10%. If corridor rule is used then Amortization of prior net loss would have been (261276 - (2864890*10%))/10 = (261276-286489)/10= -25213/10 = (2521)