The company reports the following balances in its pension-related accounts as of January 1 of Year 1.

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The company reports the following balances in its pension-related accounts as of January 1 of Year 1.

Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $870,000

Projected benefit obligation (PBO) . . . . . . . . . . . . . . . . . . . . . . . . . 925,000

At December 31 of Year 1, the company estimates service costs for the year of $101,000 and interest costs equal to 10% of the beginning PBO balance. In addition, plan assets earned a return of $117,300. Over the long run, the company expects to earn 12% per year on its pension fund assets.

(1) What pension amount would the company have reported in its balance sheet as of January 1 of Year 1? Clearly state whether the amount is an asset or a liability.

(2) Compute the amount to be reported on the income statement as pension expense for Year 1.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Intermediate Accounting

ISBN: 978-1133957911

19th edition

Authors: Earl K. Stice, James D. Stice

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