On January 1, 2010 Canes.com hired a new CEO and established a defined benefit pension plan for the CEO. Under the terms of the Plan, the CEO will receive annual pension payments beginning on the CEO’s retirement date for the rest of the CEO’s life. The annual pension payments will be calculated using the following formula: [years of employment] x [2%] x [highest yearly compensation between January 1, 2010 and retirement date]. The Company assumes the CEO will retire on December 31, 2016; the CEO will receive 25 annual payments starting on the retirement date; the CEO’s highest yearly compensation will be $500,000. The Company assumes an interest rate of 5%. The Company contributes $120,000 to the Plan in 2010 and $100,000 to the Plan in 2011. The Plan assets increase in value by $45,000 in 2010 and increase in value by $50,000 in 2011. What will the company report as Pension expense for the year ended December 31, 2011? a. $121,473 b. $71,473 c. $231,902 d. $65,430
On January 1, 2010 Canes.com hired a new CEO and established a defined benefit pension plan for the CEO. Under the terms of the Plan, the CEO will receive annual pension payments beginning on the CEO’s retirement date for the rest of the CEO’s life. The annual pension payments will be calculated using the following formula: [years of employment] x [2%] x [highest yearly compensation between January 1, 2010 and retirement date]. The Company assumes the CEO will retire on December 31, 2016; the CEO will receive 25 annual payments starting on the retirement date; the CEO’s highest yearly compensation will be $500,000. The Company assumes an interest rate of 5%. The Company contributes $120,000 to the Plan in 2010 and $100,000 to the Plan in 2011. The Plan assets increase in value by $45,000 in 2010 and increase in value by $50,000 in 2011. What will the company report as Pension expense for the year ended December 31, 2011?
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a. |
$121,473 |
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|
b. |
$71,473 |
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|
c. |
$231,902 |
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|
d. |
$65,430 |
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