ExpertHard1 markMultiple Choice
CPA · Question 43 · Area II: Balance Sheet Accounts
Pinnacle Corp. has the following information for its defined benefit pension plan:<br/>- Service cost: $180,000<br/>- Interest cost: $150,000<br/>- Expected return on plan assets: $120,000<br/>- Amortization of prior service cost: $25,000<br/>- Amortization of net loss: $15,000<br/>- Employer contributions: $200,000<br/>- Benefits paid to retirees: $100,000<br/><br/>What is Pinnacle's net pension cost for the year?
Pinnacle Corp. has the following information for its defined benefit pension plan:<br/>- Service cost: $180,000<br/>- Interest cost: $150,000<br/>- Expected return on plan assets: $120,000<br/>- Amortization of prior service cost: $25,000<br/>- Amortization of net loss: $15,000<br/>- Employer contributions: $200,000<br/>- Benefits paid to retirees: $100,000<br/><br/>What is Pinnacle's net pension cost for the year?
Answer options:
A.
$250,000
B.
$210,000
C.
$450,000
D.
$50,000
How to approach this question
Calculate net pension cost as: Service cost + Interest cost - Expected return on plan assets + Amortization of prior service cost + Amortization of net loss. Employer contributions and benefit payments don't affect pension expense.
Full Answer
A.$250,000✓ Correct
Under ASC 715, net pension cost consists of: service cost, interest cost, expected return on plan assets (reduces expense), and amortization of prior service costs and net gains/losses. Employer contributions affect the funded status but not the expense. Benefits paid reduce both plan assets and PBO but don't affect expense.
Common mistakes
Including employer contributions or benefit payments in expense, adding expected return instead of subtracting it, or omitting amortization components
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