Question

Kraft, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2018:

1. Service cost $ 345,000
2. Contributions to the plan 330,000
3. Actual return on plan assets 270,000
4. Projected benefit obligation (beginning of year) 3,600,000
5. Fair value of plan assets (beginning of year) 2,400,000
6. The expected return on plan assets and the settlement rate were both 10%.


The amount of pension expense reported for 2018 is:

a) $345,000. b) $435,000. c) $465,000. d) $705,000.

Answer 1

c) $465,000

Step-by-step explanation:

The amount of pension expense reported for 2018 can be calculated using only the relevant data in the question as follows:

Pension expenses = Service cost + (Beginning of year Projected benefit obligation × 10%) - (Beginning of year fair value of plan assets × 10%)

Therefore, we have:

Pension expenses = $ 345,000 + ($3,600,000 × 10%) - ($2,400,000 × 10%) = $465,000

Therefore, the amount of pension expense reported for 2018 is $465,000.