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What is the total pension expense that ghs will recognize

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Reference no: EM132794157

Gail's Horse Stables Corp. (GHS) provides a defined contribution pension plan for its employees. The agreement includes a mandatory contribution by GHS for all employees, and a matching requirement for employees who contribute their own money to the plan.

  • Under the terms of the agreement, GHS's mandatory contribution to the pension trust is 6% of the employee's qualifying earnings. The matching provision permits employees to contribute a maximum of 4% of their earnings to the plan as well. For every dollar the employee contributes, GHS is obligated to increase its contributions to the plan by $0.50. The maximum required contribution by GHS is thus 6% + ½ (4%) = 8%.
  • For the year ended December 31, 20X8, compensation expense totalled $6,200,000, including qualifying salaries totalling $5,000,000. During the same period, employees made $150,000 in contributions to the plan that qualified for matching.

Problem 1: What is the total pension expense that GHS will recognize on its statement of comprehensive income for the year ended December 31, 20X8?

a) $375,000

b) $400,000

c) $447,000

d) $450,00

Reference no: EM132794157

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