Asked by
Greyson North
on Oct 28, 2024
Verified
Danielle Company adopted a defined benefit pension plan on January 1, 2010, and prior service credit was granted to employees.The present value of that prior service obligation as of January 1, 2010 was $1, 400, 000 and is being amortized by the straight-line method over the remaining 20-year service life of the company's active employees.Additional information relating to the company's pension plan for 2010 is presented below: Annual service cost $132,000 Contribution to the plan (December 31,2010) 390,000 Interest cost 10% Expected (and actua) return on plan assets 12%\begin{array}{ll}\text { Annual service cost } & \$ 132,000 \\\text { Contribution to the plan (December } 31,2010) & 390,000 \\\text { Interest cost } & 10 \% \\\text { Expected (and actua) return on plan assets } & 12 \%\end{array} Annual service cost Contribution to the plan (December 31,2010) Interest cost Expected (and actua) return on plan assets $132,000390,00010%12%
What amount should be recorded in Prepaid/Accrued Pension Cost when recording the 2010 pension expense and funding at December 31, 2010?
A) $ 1, 200 credit
B) $48, 000 credit
C) $87, 000 credit
D) $94, 800 credit
Prior Service Credit
A pension plan feature that grants employees credit for service periods before the commencement of the pension plan, affecting their benefits.
Defined Benefit Pension Plan
A retirement plan where the benefits that an employee will receive upon retirement are defined based on a formula considering factors such as salary history and duration of employment.
- Perform calculations and analysis on the balances of Prepaid/Accrued Pension Costs.
- Utilize amortization methods for unrecognized prior service cost.
Verified Answer
MM
Learning Objectives
- Perform calculations and analysis on the balances of Prepaid/Accrued Pension Costs.
- Utilize amortization methods for unrecognized prior service cost.