Question

The following information pertains to Havana Corporation's defined benefit pension plan:

($ in thousands)	2021 Beginning balances				2022 Beginning balances
Projected benefit obligation	$	(7,900	)		$	(8,404	)
Plan assets		7,600				8,236
Prior service cost–AOCI		790				730
Net loss–AOCI	$	910			$	980

At the end of 2021, Havana contributed $742 thousand to the pension fund and benefit payments of $784 thousand were made to retirees. The expected rate of return on plan assets was 10%, and the actuary's discount rate is 7%. There were no changes in actuarial estimates and assumptions regarding the PBO.

What is the 2021 service cost for Havana's plan?

Multiple Choice

• $428 thousand.

• $615 thousand.

• $735 thousand.

• Cannot be determined from the given information.

Answer 1

Answer
Explanation :
Particulars	Amount in Thousands
Closing balance of PBO	$           8,404
Add: Retire Benefits	$              784
Less: Interest Cost (7900 * 7%)	$             -553
Less: Beginning Balance of PBO	$          -7,900
Service Cost	$              735
Therefore, Correct option is $735 thousand