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Smith Company sponsors a defined benefit pension plan. The beginning balance of plan assets is $5 million; the beginning balance of the PBO is $5.5 million; the expected rate of return is 8%, the discount rate is 6%, and the salary trend rate is 4%. The interest cost is equal to:___________.

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abiolataiwo2015

Answer:

$330,000

Explanation:

Calculation for the interest cost

Using this is

Interest cost=Beginning balance of the PBO * discount rate

Let plug in the formula

Interest cost=$5.5 million * 6%

interest cost=$330,000

Therefore the interest cost is equal to:$330,000

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