Villa Company has experienced tough competition, leading it to seek concessions from its employees in the company’s pension plan. In exchange for promises to avoid layoffs and wage cuts, the employees agreed to receive lower pension benefits in the future. As a result, Villa amended its pension plan on January 1, 2017, and recorded negative past service cost of $125,000. Current service cost for 2017 is $26,000. Interest expense is $9,000, and interest revenue is $2,500. Actual return on assets in 2017 is $1,500. Compute Villa’s pension expense in 2017.

Villa Company has experienced tough competition, leading it to seek concessions from its employees in the company’s pension plan. In exchange for promises to avoid layoffs and wage cuts, the employees agreed to receive lower pension benefits in the future. As a result, Villa amended its pension plan on January 1, 2017, and recorded negative past service cost of $125,000. Current service cost for 2017 is $26,000. Interest expense is $9,000, and interest revenue is $2,500. Actual return on assets in 2017 is $1,500. Compute Villa’s pension expense in 2017.

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 7P

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