Question: Villa Company has experienced tough competition leading it to seek concessions
Villa Company has experienced tough competition, leading it to seek concessions from its employees in the company’s pension plan. In exchange for promises to avoid layoffs and wage cuts, the employees agreed to receive lower pension benefits in the future. As a result, Villa amended its pension plan on January 1, 2014, and recorded negative past service cost of $125,000. Current service cost for 2014 is $26,000. Interest expense is $9,000, and interest revenue is $2,500. Actual return on assets in 2012 is $1,500. Compute Villa’s pension expense in 2014.
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