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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Palm Company’s actuary has computed its prior service cost to be $5,000,000. Palm amortizes the prior service cost by the straight-line method over the remaining 25-year service life of its active employees. During the current year. Palm also recognizes $330,000 of service cost and $22,000 of interest cost. Compute Palm's pension expense for the current year.

To determine

Compute the amount of pension expense of Company P for the current year.

Explanation

Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Compute the amount of pension expense of Company P for the current year as follows:

Particulars2019
Service cost$330,000
Add: Interest cost on projected benefit obligation$22,000
Add: Amortization of prior service cost (1)$200,000
    Pension expense$552,000

Table (1)

Working note (1):

Calculate the amortization of prior service cost...

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