Question

The following information is related to the pension plan of Sandhill, Inc. for 2021.

Actual return on plan assets $480000
Amortization of net gain 205000
Amortization of prior service cost due to increase in benefits 380000
Expected return on plan assets 532000
Interest on projected benefit obligation 805000
Service cost 2100000

Pension expense for 2021 is

A. $2548000.
B. $3010000.
C. $2958000.
D. $2632000.

Answer 1

The correct answer is option (A).

Step-by-step explanation:

According to the scenario, the computation of the given data are as follows:

Pension Expense = Service Cost + Interest on Projected Benefit Obligation + Amortization of prior service cost due to increase in benefits - Expected return on plan assets - Amortization of net gain

By putting the following value in the formula, we get

Pension Expense = $2,100,000 + $805,000 + $380,000 - $532,000 - $205,000

= $2,548,000