The following is the only information pertaining to Kane Co.’s defined benefit p
ID: 2438430 • Letter: T
Question
The following is the only information pertaining to Kane Co.’s defined benefit pension plan:
Pension asset, January 1, Year 1 $ 2,000
Service cost 19,000
Interest cost 38,000
Actual and expected return on plan assets 22,000
Amortization of prior service cost arising in a prior period 52,000
Employer contributions 40,000
In its December 31, Year 1, balance sheet, what amount should Kane report as the unfunded or overfunded projected benefit obligation (PBO)?
a. $ 7,000 overfunded.
b. $15,000 underfunded.
c. $45,000 underfunded.
d. $52,000 underfunded.
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Explanation / Answer
The correct answer is option (a) i.e. $ 7,000 overfunded which is calculated as below:- Particulars Amount ($) Pension asset, January 1, Year 1 2,000 Less : Service cost 19,000 Less : Interest cost 38,000 Add : Actual and expected return on plan assets 22,000 Add : Employer contributions 40,000 Overfunded projected benefit obligation (PBO) 7,000
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