Question

Information regarding the defined-benefit pension plan of Tri Cities Transport included the following for 2016 ($ in millions):

Service cost...$48
Interest cost...$32
Actual & expected return on plan assets...$26
Amortization of net gain - AOCI...$3
Amortization of prior service cost - AOCI...$5
Retiree benefits paid (end of year)...$50

What is Tri Cities' pension expense for 2016?

A) $56 million
B) $62 million
C) $98 million
D) $164 million

Answer 1

The pension expense for Tri Cities Transport in 2016 is $2 million.

Step-by-step explanation:

The pension expense for Tri Cities Transport in 2016 can be calculated by adding up the different components of the plan. These include the service cost, interest cost, actual and expected return on plan assets, amortization of net gain, and amortization of prior service cost. Retiree benefits paid are then subtracted from the total. In this case, the pension expense for 2016 would be:

Pension expense = Service cost + Interest cost - Actual & expected return on plan assets + Amortization of net gain - Amortization of prior service cost - Retiree benefits paid.

Using the given information:

Pension expense = $48 + $32 - $26 + $3 - $5 - $50 = $2 million.

So, the correct answer is $2 million.