Question

Zink Co.’s defined benefit pension plan had plan assets with a fair value of $325,000 at December 31, 2013, and of $375,000 at December 31, 2014. During 2014, Zink Co. recognized pension expense of $120,000 and contributed a total of $130,000 to the plan. Certain plan investments, which had a cost and carrying value of $125,000, were sold for $70,000 and payments to retirees for pension benefits amounted to $150,000. What was the actual return on plan assets?

Answer 1

$ 70,000

Step-by-step explanation:

Beginning plan assets = $ 325,000

Contribution to the plan = $ 130,000

Thus, the total assets available = $ 325,000 + $ 130,000 = $ 455,000.

Now,

The assets distributed = $150,000

Therefore,

the balance left after distribution = total assets available - assets distributed

or

the balance left after distribution = $ 455,000 - $ 150,000 = $ 305,000

Also,

the actual ending balance = $ 375,000

Hence, the difference of the balance left after distribution and the actual ending balance represents the return on plan assets.

therefore,

The return on plan assets = $ 375,000 - $ 305,000 = $ 70,000