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Economicn Pension Expense Q

Folks,

see below a fairly easy Eco Pension Expense Q; It is nto this Q i am worried about but wghich formula(s) to learn??


Federal Companies reported the following information in the footnotes to its most recent financial statements:
PBO $65,000,000
Ending PBO 90,000,000
Service Cost 27,000,000
Interest Cost 3,000,000
Benefits Paid 5,000,000
Actual Return on Plan Assets 7,500,000
Expected Return on Plan Assets 8,500,000
Given the information above, calculate Federal?|s economic pension expense for the year.
A) $41,000,000.
B) $22,500,000.
C) $27,500,000.

The correct answer was B) $22,500,000.
Economic pension expense = service cost + interest cost ?V actual return on plan assets + plan ammendments

Ok, but I also have the following formulas for Economic pension expense which do not come up wIth thE same answer???

1)
Change PBO
-benefits
-Actual Rtn
+ plan amendments

Im not happy?o

Change PBO = 35 Mill
- Benefits Paid = (5) Mill
- Actual Returns = (7.5) Mill
= 22.5 Mill

no information with respect to Plan Amendments is given.

your other way: 27 + 3 - 7.5 = 22.5

CP

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Change in PBO is (90 - 65) = 25. No idea if you second formula is right.

Another way to calculate Economic Pension Expense is: Change in funded status - contributions

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The other formula should be:

Change in PBO + Benefits paid - Actual return on Plan assets

Benefits paid increase economic pension expense.

Expense = Actual cash paid + accrued amount.

Accrued amount is reflected as increase in liability (PBO).

Expense is offset by ACTUAL return on plan assets.

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