Explanation of how the professor find the answer

1.Assume the following data is presented for Oehler Company for the year 2014

Annual service cost for 2014................................................................. $29,000

Settlement rate is 7%; expected earnings rate is 7%

Actual return on plan assets for 2014..................................................... 28,000

Amortization of PSC in 2014..................................................................... 21,000

Contributions (funding) in 2014................................................................ 32,000

Benefits paid to retirees in 2014............................................................... 20,000

The end-of-year 2014 projected benefit obligation....................... .... 640,000

Required:

(a)Determine the pension expense for the year 2014

(b).Determine the beginning of the year projected benefit obligation

Solution

Annual service cost for 2014

$29,000

Settlement rate is 7%; expected earnings rate is 7%

Actual return on plan assets for 2014

28,000

Amortization of PSC in 2014

21,000

Contributions (funding) in 2014

32,000

Benefits paid to retirees in 2014

20,000

The end-of-year 2014 projected benefit obligation

640,000

Pension Expense

Service cost

29,000

Interest on PBO

41,280

Actual earnings on plan assets

(28,000)

Amort of PSC

21,000

Amort of gain/loss

0

Total pension expense

63,280

PBO

Beginning of year

589,720

Service cost

29,000

Interest on PBO (BOY * .07)

41,280

Benefits paid

(20,000)

End of year

640,000