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Hobbiton Tours Ltd. has the following details related to its defined benefit pension plan as at December 31, 2024: Pension fund assets of $1,900,000 and actuarial obligation of $1,806,317.    The actuarial obligation represents the present value of a single benefit payment of $3,200,000 that is due on December 31, 2030, discounted at an interest rate of 10%; i.e. $3,200,000 / 1.106 = $1,806,317.    Funding during 2025 was $55,000. The actual value of pension fund assets at the end of 2025 was $2,171,000. As a result of the current services received from employees, the single payment due on December 31, 2030, had increased from $3,200,000 to $3,380,000.      Required  Compute the current service cost for 2025 and the amount of the accrued benefit obligation at December 31, 2025. Perform this computation for an interest rate of 8%.  Derive the pension expense for 2025 under various assumptions about the expected return and discount rate. Complete the following table:      Case B  Expected return assumption   12%  Discount rate assumption  8%  Current service cost    Interest on obligation    Expected return on assets    Total pension expense

Hobbiton Tours Ltd. has the following details related to its defined benefit pension plan as at December 31, 2024: Pension fund assets of $1,900,000 and actuarial obligation of $1,806,317.    The actuarial obligation represents the present value of a single benefit payment of $3,200,000 that is due on December 31, 2030, discounted at an interest rate of 10%; i.e. $3,200,000 / 1.106 = $1,806,317.    Funding during 2025 was $55,000. The actual value of pension fund assets at the end of 2025 was $2,171,000. As a result of the current services received from employees, the single payment due on December 31, 2030, had increased from $3,200,000 to $3,380,000.      Required  Compute the current service cost for 2025 and the amount of the accrued benefit obligation at December 31, 2025. Perform this computation for an interest rate of 8%.  Derive the pension expense for 2025 under various assumptions about the expected return and discount rate. Complete the following table:      Case B  Expected return assumption   12%  Discount rate assumption  8%  Current service cost    Interest on obligation    Expected return on assets    Total pension expense

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter19: Accounting For Post Retirement Benefits
Section: Chapter Questions
Problem 6MC
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Hobbiton Tours Ltd. has the following details related to its defined benefit pension plan as at December 31, 2024: Pension fund assets of $1,900,000 and actuarial obligation of $1,806,317. 

 

The actuarial obligation represents the present value of a single benefit payment of $3,200,000 that is due on December 31, 2030, discounted at an interest rate of 10%; i.e. $3,200,000 / 1.106 = $1,806,317. 

 

Funding during 2025 was $55,000. The actual value of pension fund assets at the end of 2025 was $2,171,000. As a result of the current services received from employees, the single payment due on December 31, 2030, had increased from $3,200,000 to $3,380,000. 

 

 

Required 

  1. Compute the current service cost for 2025 and the amount of the accrued benefit obligation at December 31, 2025. Perform this computation for an interest rate of 8%. 
  1. Derive the pension expense for 2025 under various assumptions about the expected return and discount rate. Complete the following table: 

 

 

Case B 

Expected return assumption  

12% 

Discount rate assumption 

8% 

Current service cost 

 

Interest on obligation 

 

Expected return on assets 

 

Total pension expense 

 

 

 

 

 

 

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