Question

Sheller Company estimates that its pension plan asset will earn a return of 10%. The beginning balance of plan assets was $500,000 and the ending balance was $560,000. During the year, the plan earned an actual return of 8%. As a result of this, pension expense will decrease by

Answer 1

Answer: $50000

Explanation:

From the question, we are informed that Sheller Company estimates that its pension plan asset will earn a return of 10% as the beginning balance of plan assets was $500,000 and the ending balance was $560,000.

Due to this, then the pension expense will decrease by:

= 10% × $500,000

= $50,000

It should be noted that the expected return on plan assets will reduce pension expense by $50000.