Question

Kraft, Inc. sponsors a defined-benefit pension plan. During Year 4, the service cost for the plan was $230,000; the contributions by Kraft to the plan were $220,000; and the actual return on the plan assets was $180,000. The beginning balance of the PBO in Year 4 was $2,400,000 and the beginning balance of the plan assets was $1,600,000. If the expected return on plan assets and the interest rate were both 10%, how much total pension cost should Kraft record for Year 4?

		310,000
		230,000
		470,000
		290,000

Answer 1

Answer: $310,000

Explanation

Calculation of Pension Expense for Year 4
	$
Service Cost	230,000.00
Interest cost (2,400,000 x 10%)	240,000.00
Expected return on the plan assets (1,600,000 x 10%)	(160,000.00)
Pension Expense	310,000.00