except that question 558 never says “total” or anything different and still includes service cost
558: On January 2, 20X1, East Corp. adopted a defined benefit pension plan. The plan's service cost of $150,000 was fully funded at the end of 20X1. Prior service cost was funded by a contribution of $60,000 in 20X1. Amortization of prior service cost was $24,000 for 20X1. Assuming that no amortization of unrecognized gain or loss is required in 20X1, what amount should East recognize as net periodic pension cost in 20X1?
answer: East Corp.'s net periodic pension cost for 20X1 is $174,000, as shown below:
Service cost $150,000
Interest cost 0
Amortization of past service cost 24,000
Expected return on plan assets 0
Amortization of unrecognized gain/loss 0
$174,000
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The interest cost is computed by applying the appropriate rate times the projected benefit obligation (PBO) at January 1, 20X1. Since this is the first year of the plan, the PBO at January 1, 20X1, is $0, which means that the interest cost for 20X1 is $0. The expected return on the plan assets is computed by applying the appropriate rate times the fair value of the plan assets (PA) at January 1, 20X1. Since this is the first year of the plan, the PA at January 1, 20X1, is $0, which means that the expected return on plan assets for 20X1 is $0. Since no amortization of unrecognized gain/loss is necessary (which is stated in the facts), the net periodic pension cost consists of the service cost and the amortization of past service costs.
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