Question

The following information pertains to Abel Corporation's pension plan. PBO: 1/1/17: $6,000,000; 12/31/17: $6,600,000. The discount rate is 6% and the expected return on plan assets is 8% for the year ended December 31, 2017. The interest cost component of pension expense for 2017 will be

Answer 1

$360,000.

Step-by-step explanation:

Given:

PBO 1/1/17 = $6,000,000

PBO 12/21/17 = $6,600,000

Discount rate = 6% = 6 / 100 = 0.06

Expected rate of return = 8% = 8 / 100 = 0.08

Interest cost component of pension expense = ?

Computation of Interest cost component of pension expense:

Interest will be payable on opening balance:

= PBO 1/1/17 x Discount rate

= $6,000,000 x 0.06

= $360,000.