CFA Practice Question

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CFA Practice Question

Panther Products sponsors a defined benefit pension plan. The following information pertains to that plan:

Service cost for 2011: 480 million.
Retiree benefits paid (end of year): 30 million.
Actual and expected return on plan assets for 2011: 105 million.
Amortization of unrecognized prior service cost: 15 million.
Interest on pension obligation for 2011: 150 million.

The pension expense that Panther should report in its 2011 income statement is:
Correct Answer: $540 million

Service cost ($480) + interest expense ($150) - expected return on plan assets ($105) + amortization of unrecognized prior service cost ($15) [in millions].

User Contributed Comments 4

User Comment
robkaz Doesn't 30 million of benefit matter? Because it is paid out at the end of year? Anyone?
LRS24 The $30 million paid out reduces the PBO but not the pension expense
ssradja cause it is paid benefits, not pension expense
ljuricek Retiree benefits are already included in Return on plan assets.
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