FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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The Kollar Company has a defined benefit pension plan. Pension information concerning the fiscal years 2024 and 2025 are presented below ($ in millions):
Information Provided by Pension Plan Actuary:
- Projected benefit obligation as of December 31, 2023 = $1,800.
- Prior service cost from plan amendment on January 2, 2024 = $400 (straight-line amortization for 10-year average remaining service period).
- Service cost for 2024 = $520.
- Service cost for 2025 = $570.
- Discount rate used by actuary on projected benefit obligation for 2024 and 2025 = 10%.
- Payments to retirees in 2024 = $380.
- Payments to retirees in 2025 = $450.
- No changes in actuarial assumptions or estimates.
- Net gain—AOCI on January 1, 2024 = $230.
- Net gains and losses are amortized for 10 years in 2024 and 2025.
Information Provided by Pension Fund Trustee:
- Plan asset balance at fair value on January 1, 2024 = $1,600.
- 2024 contributions = $540.
- 2025 contributions = $590.
- Expected long-term
rate of return on plan assets = 12%. - 2024 actual return on plan assets = $180.
- 2025 actual return on plan assets = $210.
- Calculate pension expense for 2024 and 2025.
($ in millions)
2024
2025
Service cost
$520.0
$570.0
Interest on PBO
220.0
256.0
Expected return
(192.0)
?
Amortization of prior service cost
40.0
40.0
Amortization of net gain
(5.0)
?
Pension expense
$583.0
$
SAVE
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