Rodeo Corporation amended its defined benefit pension plan o

Rodeo Corporation amended its defined benefit pension plan on January 31, 2018, to increase retirement benefits earned with each service year. The actuary estimated the prior service cost to be $216,000. Rodeo\'s 80 present employees are expected to retire at the rate of about 10 each year at the end of each of the next eight years beginning on December 31, 2018.

Required:
Using the service method, calculate the amount of prior service cost to be amortized to pension expense in each of the next eight years.

2018 ____

2019____

2020____

2021____

2022____

2023____

2024____

2025____

TOTAL ____

Solution

Year No. of Employee Fraction Prior service cost Amount amortized 2018 80 80/360 $216,000 $48,000 2019 70 70/360 216,000 42,000 2020 60 60/360 216,000 36,000 2021 50 50/360 216,000 30,000 2022 40 40/360 216,000 24,000 2023 30 30/360 216,000 18,000 2024 20 20/360 216,000 12,000 2025 10 10/360 216,000 6,000 Total 360 $216,000