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   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Calculation:

Service cost 600,000
Add: Interest cost (600,000*10%) 60,000
Less: Expected return on the plan assets 66,560
Pension expense for the year 2022 593,440

Working Notes:

Funding on Jan 1 2021 400,000
Add: Actual return on Dec 31 2021 (400,000*8%) 32,000
Balance of plan assets on Dec 31 2021 432,000
Add: Current funding on Jan 1 2022 400,000
Balance of plan assets on Jan 1 2022 832,000
Balance of plan asset on Dec 31 2022 (832,000*8%) 66,560
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
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...
On January 1, 2018, Tiffany Academy instituted a defined benefit pension plan for its employees. The...
On January 1, 2018, Tiffany Academy instituted a defined benefit pension plan for its employees. The annual service cost for each year of 2018 and 2019 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. Tiffany funded the plan in the amount of $400,000 each January 1, beginning on January 1, 2018. What net pension liability should Tiffany report in...
Herring Wholesale Company has a defined benefit pension plan. On January 1, 2021, the following pension...
Herring Wholesale Company has a defined benefit pension plan. On January 1, 2021, the following pension related data were available: ($ in thousands) Net gain–AOCI $350 Accumulated benefit obligation 3,170 Projected benefit obligation 3,200 Fair value of plan assets 2,700 Average remaining service period of active employees (expected to remain constant for the next several years) 15 years The rate of return on plan assets during 2021 was 9%, although it was expected to be 10%. The actuary revised assumptions...
Lewis Industries adopted a defined benefit pension plan on January 1, 2021. By making the provisions...
Lewis Industries adopted a defined benefit pension plan on January 1, 2021. By making the provisions of the plan retroactive to prior years, Lewis incurred a prior service cost of $3 million. The prior service cost was funded immediately by a $3 million cash payment to the fund trustee on January 2, 2021. However, the cost is to be amortized (expensed) over 10 years. The service cost—$290,000 for 2021—is fully funded at the end of each year. Both the actuary's...
Seigel Co. maintains a defined-benefit pension plan for its employees. At each balance sheet date, Seigel...
Seigel Co. maintains a defined-benefit pension plan for its employees. At each balance sheet date, Seigel should report a pension asset / liability equal to the accumulated benefit obligation. projected benefit obligation. accumulated benefit obligation. funded status relative to the projected benefit obligation.
Bonita Company has five employees participating in its defined benefit pension plan. Expected years of future...
Bonita Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2017 are as follows. Employee Future Years of Service Jim 3 Paul 4 Nancy 5 Dave 6 Kathy 6 On January 1, 2017, the company amended its pension plan, increasing its projected benefit obligation by $87,840. Compute the amount of prior service cost amortization for the years 2017 through 2022 using the years-of-service method, setting up...
Exercise 20-5 Vaughn Company has five employees participating in its defined benefit pension plan. Expected years...
Exercise 20-5 Vaughn Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2017 are as follows. Employee Future Years of Service Jim 3 Paul 4 Nancy 5 Dave 6 Kathy 6 On January 1, 2017, the company amended its pension plan, increasing its projected benefit obligation by $84,240. Compute the amount of prior service cost amortization for the years 2017 through 2022 using the years-of-service method,...
Lerchman Corp sponsors a defined-benefit pension plan for its employees. The company's actuary has provided the...
Lerchman Corp sponsors a defined-benefit pension plan for its employees. The company's actuary has provided the following information for the year ended December 31, 2022: Projected benefit obligation                                                 $730,000 Fair value of plan assets                                                        860,000 Service cost                                                                              240,000 Interest on projected benefit obligation                                  24,000 Amortization of prior service cost                                            60,000 Expected and actual return on plan assets                           82,500 The plan paid benefits of $150,000. The market-related asset value equals the fair value of plan assets. No contributions have been made...
Sage Company has five employees participating in its defined benefit pension plan. Expected years of future...
Sage Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2020 are as follows. Employee Future Years of Service Jim 3 Paul 4 Nancy 5 Dave 6 Kathy 6 On January 1, 2020, the company amended its pension plan, increasing its projected benefit obligation by $77,040. Compute the amount of prior service cost amortization for the years 2020 through 2025 using the years-of-service method, setting up...
Larkspur Company has five employees participating in its defined benefit pension plan. Expected years of future...
Larkspur Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2020 are as follows. Employee Future Years of Service Jim 3 Paul 4 Nancy 5 Dave 6 Kathy 6 On January 1, 2020, the company amended its pension plan, increasing its projected benefit obligation by $80,640. Compute the amount of prior service cost amortization for the years 2020 through 2025 using the years-of-service method, setting up...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT