ABC Corporation offers a defined benefit pension plan as part of its post-employment benefits to employees. The plan is designed to provide a reliable income stream to employees after retirement. In the current fiscal year, the corporation reports the following related to the pension plan: Service cost for the year: $500,000 Interest cost: $300,000 Expected return on plan assets: $200,000 Amortization of prior service cost: $100,000 Given this information, what is the net pension expense that ABC Corporation should recognize in its financial statements for the year?

Exam

CFA Level 2

Section

Difficulty

Financial Reporting and Analysis

Net Pension Expense Calculation

Hard Employee Compensation Post-employment Benefits

ABC Corporation offers a defined benefit pension plan as part of its post-employment benefits to employees. The plan is designed to provide a reliable income stream to employees after retirement. In the current fiscal year, the corporation reports the following related to the pension plan:

Service cost for the year: $500,000
Interest cost: $300,000
Expected return on plan assets: $200,000
Amortization of prior service cost: $100,000

Given this information, what is the net pension expense that ABC Corporation should recognize in its financial statements for the year?

Net pension expense is $700,000.

Net pension expense is $1,000,000.

Net pension expense is $900,000.

Hint

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