Question

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

($ in thousands)	2021 Beginning balances				2022 Beginning balances
Projected benefit obligation	$	(7,500	)		$	(8,004	)
Plan assets		7,200				7,836
Prior service cost–AOCI		750				700
Net loss–AOCI	$	870			$	950

At the end of 2021, Havana contributed $755 thousand to the pension fund and benefit payments of $744 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 pension expense for Havana’s plan?

Multiple Choice

• $735 thousand.

• $593 thousand.

• $688 thousand.

• None of these are correct.

Answer 1

Answer :-  Option B) $593 Thousand is correct answer

Explanation:-

Working Notes:-

Let actual return be x.

Ending balance of plan assets = Beginning balance of plan asset + Actual return + Cash Contributions - Retiree benefits

$7,836 = $7200 + x + $755 - $744

x = $7,836- $7,200 - $755 + $744

x= $625

Actual return = $625 thousand

Loss on plant Assets = (7200*10%)

= 720-625

= 95***