Question #7
Reading: Reading 9 Employee Compensation - Post-Employment and Share-Based
PDF File: Reading 9 Employee Compensation - Post-Employment and Share-Based.pdf
Page: 3
Status: Correct
Correct Answer: A
Question
Federal Companies' reports under U.S. GAAP included the following information in the footnotes to its most recent financial statements: Beginning Projected Benefit Obligation (PBO) $65,000,000 Beginning FV of Plan Assets 60,000,000 Service Cost 27,000,000 Interest Cost 3,000,000 Unamortized Actuarial Losses (Start of the Year) 5,000,000 Actual Return on Plan Assets 7,500,000 Expected Return on Plan Assets 8,500,000 Given the information above, calculate Federal's total periodic pension cost for the year.
Answer Choices:
A. $41,000,000.00
B. $21,500,000.00
C. $27,500,000.00
Explanation
Periodic pension cost = service cost + interest cost – expected return on plan
assets
Therefore, $27,000,000 + 3,000,000 – 8,500,000 = $21,500,000
Since the unamortized actuarial loss is less than 10% of beginning PBO, no amortization is
needed.