Answer:
The firm has an underfunded plan and reports a ($4,100) liability
Explanation:
IF a company has a defined benefit pension plan for its employees, and On December 31, year one, the accumulated benefit obligation is $45,900, the projected benefit obligation is $68,100, and the fair value of the plan assets is $62,000.
The amount, related to the defined benefit plan should be recognized in the balance sheet at December 31, year one is the net off Projected Benefit Obligation and Fair value of the plan assets
Which is $68,100 - $62,000 = $4,100
The firm has an underfunded plan and reports a ($4,100) liability
Answer:
B) A liability of $6,100.
Explanation:
pension liability = projected benefit obligation - fair value of plan assets = $68,100 - $62,100 = $6,100
Since the projected obligations of the pension plan are higher than the fair value of the plan, the plan shows a deficit that will be assumed by the company. Only the liability must be included in the balance sheet, but both the project obligations and fair value of the plan must be included in the footnotes.
