Question

For Warren Corporation, year-end plan assets were \(2,000,000. At the beginning of the year, plan assets were \)1,780,000. During the year, contributions to the pension fund were \(120,000, and benefits paid were \)200,000. Compute Warren’s actual return on plan assets.

Short answer

Plan Assets are those categories of assets an organization holds for its employee’s retirement benefits. These assets are usually procured for pension benefitsgiven to the employees.

Step-by-step solution

Given are the amounts:

Particulars	Amount
Ending plan assets	$2,000,000
Beginning plan assets	$1,780,000
Contributions	$120,000
Benefits paid	$200,000

Calculation of Warren’s actual return on plan assets

$\begin{array}{rcl}\mathrm{Actual}\mathrm{return}\mathrm{on}\mathrm{plan}\mathrm{assets}& =& (\mathrm{Ending}\mathrm{plan}\mathrm{assets}-\mathrm{Beginning}\mathrm{plan}\mathrm{assets})-(\mathrm{Contributions}-\mathrm{Benefits}\mathrm{paid})\\ & =& (\$2,000,000-\$1,780,000)-(\$120,000-\$200,000)\\ & =& (\$220,000+\$80,000)\\ & =& \$300,000\\ & & \end{array}$