Zenith Company, a calendar-year entity, amends its defined benefit pension plan on January 1, 2019 and must recognize the increase in past service costs of its vested and non-vested employees as of that date in the calculation of its net 2019 pension expense (or revenue). The pertinent facts as of January 1, 2019 are:
Increase in Present Service Cost (PSC)-vested employees: $5,000
Increase in Present Service Cost (PSC)-non-vested employees: $2,000
Remaiining vesting period- non-vested employees: 5 years
Remaining working life-vested employees 10 years
Remaining working life-non-vested employees: 20 years
Required:
a. Calculate the past service cost included in the 2013 net pension expense (or revenue) under U. S. GAAP.

net pension expense (or revenue) under U.S.GAAP is $600

Explanation:

the past service cost included in the 2013 net pension expense ( or revenue) under U.S. GAAP is calculated below;

past service cost = { ( increase PSC for vested employees)

                             (remaining working life of vested employees)

                                                        +

                              {( increase PSC for non-vested employee)}

                               ( remaining working life of non- vested employees)

past service cost = { $5000/10years) + ( $ 2000/20years)

past service cost = $500 + $100

past service cost =$600

Therefore the past service cost  included in the 2013 net pension expense (or revenue) under U.S.GAAP is $600

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