Moorgate Ltd newly established a defined benefit plan on 1 January 2015. Mike started working for Moorgate Ltd on 1 January 2015 and will retire on 31 December 2017. Upon retirement, Mike will receive a pension benefit payment as 121 the number of years worked for the company. Moorgate Ltd made a 40 cash contribution to an independent pension fund on 31 December 2015. The independent pension fund invested half of the contribution in high-quality corporate bonds and the other half of the contribution in UK Treasury bills. The yield of high-quality corporate bonds is 10% while UK Treasury bills have a yield of 3%. The statutory tax rate (STR) is 20% and the effective tax rate (ETR) is 15%.

Required:

(a) Calculate the net defined benefit asset/liability to be reported on Moorgate Ltds balance sheet as of 31 December 2015. (8 marks)

(b) Calculate the amount of defined benefit cost to be reported on Moorgate Ltds statement of comprehensive income for the year ending on 31 December 2015. (4 marks)

(c) Assume that for Moorgate Ltds defined benefit plan, only the cash contributions into plan assets made by Moorgate Ltd are tax-deductible. Calculate the amount of deferred tax liability (asset) related to net defined benefit asset/liability on Moorgate Ltds balance sheet as of 31 December 2015.