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Explain why we ignore contribution and actual return

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Reference no: EM131820955

Kraft, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2013.

Service cost $250,000

Contributions to the plan 220,000

Actual return on plan assets 180,000

Projected benefit obligation (beginning of year) 2,400,000

Fair value of plan assets (beginning of year) 1,600,000

The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2013 is

a. $250,000.

b. $310,000.

c. $330,000.

d. $490,000.

Hi, can you explain why we ignore contribution and actual return when we are calculating the pension expense, which is different from the example in book? Why we minus fair value of plan assets*10%?

Reference no: EM131820955

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