On January 1, 2018,Gillock Climbing Academy instituted a defined benefit pension
ID: 2548436 • Letter: O
Question
On January 1, 2018,Gillock Climbing Academy instituted a defined benefit pension plan for its employees. The annual service cost for each year of 2018 and 2019 was $600,000. The interest rate used to determine the projected benefit obligation is 10%. Both the actual and the expected return on plan assets are 8% for both years. Gillock funded the plan in the amount of $400,000 each January 1, beginning on January 1, 2018.
What pension liability should Gillock report in its balance sheet for the year ended December 31, 2019?
$421,440
$481,440
$393,440
$361,440
Explanation / Answer
Net Liability as per Balance sheet for 2019 = 1260000-898560 = 361,440
Defined Benefit Obligation Particulars 2018 2019 Opening Balance, PBO 0 600,000 +Current Service Cost 600,000 600,000 +Interest Cost 0 60,000 +/-Acturial Gain/losses 0 0 -Benefits paid out 0 0 Closing Balance, PBO 600,000 1,260,000