Final answer:
East Inc.'s net impact from pension-related transactions in Year 5 is an increase of $90,000. This reflects the difference between the $380,000 contributed to the pension plan and the $290,000 paid out to beneficiaries. The company's actions demonstrate a commitment to maintaining the pension plan's funded status.
Step-by-step explanation:
The student's question pertains to a company's pension plan financial transactions. In Year 5, East Inc. contributes $380,000 to its pension plan and pays out $290,000 to plan beneficiaries. When a company contributes more to the pension plan than it pays out, as in this case, the net impact on the company's pension plan assets is an increase. Specifically, the net increase is the difference between the contribution and the payouts, which is $380,000 - $290,000 = $90,000.
While the company has had an outflow of cash (contributions to the pension fund), the liability associated with future pension payments is reduced due to this contribution, which exceeds the current-year beneficiary payouts. In terms of the company's balance sheet, there will be a reduction of cash and an increase in the funded status of the pension plan. This illustrates a case of efficient pension plan management, where despite the potential issues of inflation eroding the purchasing power of fixed pensions, the company is managing its funds to meet its defined benefit obligations.
In a broader context, this also emphasizes the importance for retirees to consider inflation and how it can affect their fixed income over time. Even a small annual inflation rate can significantly lower the purchasing power of their pension benefits, making it vital for pension plans to be well-funded and managed.