The
following information is in regards to Saverio Corp.’s defined benefit pension,
which is accounted for with the immediate recognition approach.
Accrued
benefit obligation, funding basis, 1/1/11 (before amendment) ……$176,000
Plan
assets, 1/1/11……………………………………………………………..155,000
Discount
rate………………………………………………………………………10%
Annual
pension service cost…………………………………………………….13,000
Actual
return on plan assets………………………………………………………...5%
Expected
return on plan assets …………………………………………………….9%
On
January 1, 2011, the company amended its pension plan, which resulted in
additional prior service benefits being granted to current employees. The
present value of the prior service benefits is $34,000, and the employees are
expected to provide future benefits over the next seven years as a result of
the pension change.
Instructions
Calculate
the pension expense for 2011.
Pension expense
2011:
Service cost $
13,000
Interest on ABO (10% of $210,000) 21,000
Actual return on plan assets (5% of $155,000) (7,750)
Past service cost
34,000
$ 60,250
