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How does the actual return on plan assets affect profits

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Question - Analyzing and Interpreting Pension Disclosures-Plan Assets and Cash Flow

YUM! Brands Inc. discloses the following pension footnote in its 10-K report.

Pension Plan Assets ($ millions) 2018 Fair value of plan assets at beginning of year $864 Actual return on plan assets (49) Employer contributions 13 Benefits paid (73) Fair value of plan assets at end of year $755

a. How does the "actual return on plan assets" of $(49) million affect YUM!'s reported profits for 2018?

b. YUM! Brands contributed $13 million cash to the pension plan investment account (asset) during the year. Which of the following is true?

i. YUM! recognized the $13 million cash payment as a pension expense in 2018.

ii. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 because it is not tax deductible.

iii. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 because it relates to employees' service in prior periods.

iv. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 because benefits of $73 million were paid to employees and that amount represents the pension expense.

v. None of the above.

c. YUM!'s pension plan paid out $73 million in benefits during 2018. How is this payment reported?

Reference no: EM132763737

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