FA Module 14: Employee pensions and share-based compensation – homework assignment

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Homework assignment: Defined benefit pension plan

A defined benefit pension plan has the following entries for 20X1.

●    Employer contributions                            80
●    Current service costs                            10
●    Past service costs                                30
●    Discount rate used to estimate plan liabilities    6%
●    Benefit obligation at beginning of year            5,000
●    Benefit obligation at end of year                    4,800
●    Actuarial loss due to increase in plan obligation    50
●    Fair value of plan assets at beginning of year    4,500
●    Actual return on plan assets                    280
●    Expected rate of return on plan assets            8%

Compute the following for 20X1:

A.    What is the total service cost?
B.    What is the interest cost on the benefit obligation?
C.    What are the pension benefits paid during the year?
D.    What is the periodic pension cost?
E.    What is the fair value of the plan assets at the end of the year?