Babcock Company received the following reports of its defined benefit pension plan for the current calendar year: PBO Plan assets Balance, January 1 $ 650,000 Balance, January 1 $ 530,000 Service cost 369,000 Actual return 51,000 Interest cost 74,000 Annual contribution 226,000 Benefits paid (97,000 ) Benefits paid (97,000 ) Balance, December 31 $ 996,000 Balance, December 31 $ 710,000 The long-term expected rate of return on plan assets is 8%. Assuming no other data are relevant, what is the pension expense for the year

The pension expense for the year is $400600

Explanation:

From the question; we have:

Babcock Company received the following reports of its defined benefit pension plan for the current calendar year:

PBO                                                     Plan assets    

Balance, January 1         650,000      Balance, January 1    530,000

Service cost                      369,00      Actual return                 51,000

Interest cost                       74,000     Annual contribution   226,000

Benefits paid                   (97,000 )     Benefits paid              (97,000 )

Balance,December 31   $996,000   Balance, December 31  $710,000

The long-term expected rate of return on plan assets is 8%. Assuming no other data are relevant, what is the pension expense for the year

From the information given;we have the plan assets to be $530000

the expected rate of return on plan assets = 8%

therefore

expected return on the plan assets = 8%  × $530000

expected return on the plan assets = 0.08  × $530000

expected return on the plan assets = $42400

The pension expense for the year can be determined by the formula:

pension expense = service cost + interest cost - expected return on plan

                                assets.

pension expense = $(369000 + 74000 -42400)

pension expense =  $(443000 - 42400)

pension expense =  $400600

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