Baker Industries operates a defined benefit pension plan. Information received f

Question

Baker Industries operates a defined benefit pension plan. Information received from the actuary and the trustee related to the Year 2 pension plan includes the following:

Projected benefit obligation, January 1, Year 2                $1,879,000

Service cost                                                                      105,000

Interest cost                                                                       190,000

Retirement benefits paid                                                     182,000

Employer contribution                                                         155,000

Actual return on plan assets                                                215,000

Amortization of prior service cost                                         122,000

Amortization of prior-year net pension loss                             37,000

Fair value of pension plan assets, December 31, Year 1    1,825,000

Baker’s projected benefit obligation at December 31, Year 2, is

a.  $1,777,000

b . $1,959,000

c.  $1,992,000

d.  $2,019,000

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Explanation / Answer

Solution: Particulars Amount Projected Benefit Obligation on January 1, Year 2 1879000 Add: Service Cost 105000 Add: Interest Cost 190000 Less: Employer Contribution 155000 Projected Benefit Obligation on December 31, Year 2 2019000

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