The following information is in regards to Saverio Corp.’s defined benefit pensi
ID: 2448035 • Letter: T
Question
The following information is in regards to Saverio Corp.’s defined benefit pension, which is accounted for with the immediate recognition approach:
On January 1, 2014, 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 $37,000, and the employees are expected to provide future benefits over the next seven years as a result of the pension change. Saverio follows IFRS.
Calculate the pension expense that will be reported in net income for 2014.
Pension expense $ ????
Defined benefit obligation, 1/1/14 (before amendment) $154,000 Plan assets, 1/1/14 125,000 Discount rate and expected return on fund assets 9% Annual pension service cost 10,000 Actual return on plan assets 5%Explanation / Answer
Service cost Given 10,000 Interest cost =154000*0.09 13860 Actual return on plan assets =125000*0.05 -6250 Annual pension service cost Given 10000 present value of the prior service benefits 37000 37000 Pension expense $ 64,610
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