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Chapter 20: Q14Q. (page 1161)

What are “liability gains and losses,” and how are they accounted for?

Short Answer

Expert verified

Pension liability is an obligation for an organization because thetotal pension amount has to be paid to its employees and is reported under theliability section of the organization's balance sheet.

Step by step solution

01

Liability gains and losses

Liability gains and losses are those amounts an organization receives due to the changes in defined pension plans. These arise due to an uncertain increase or decrease in the pension obligation of an organization.

02

Liability gains and losses are accounted for

Both are merged with the organization's total unrecognized net gain or net loss and are represented under the memo record column of the organization's pension worksheet yearly.

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Most popular questions from this chapter

Identify the five components that comprise pension expense. Briefly explain the nature of each component.

Question: The following defined pension data of Doreen Corp. apply to the year 2017.

Defined benefit obligation, 1/1/17 (before amendment) $560,000

Plan assets, 1/1/17 546,200

Pension asset/liability 13,800 Cr.

On January 1, 2017, Doreen Corp., through plan amendment,

grants past service benefits having a present value of 120,000

Discount rate 9%

Service cost 58,000

Contributions (funding) 65,000

Actual return on plan assets 49,158

Benefits paid to retirees 40,000

Instructions

For 2017, prepare a pension worksheet for Doreen Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.

Question: What is meant by “past service cost”? When is past service cost recognized as pension expense?

Boey Company reported net income of \(25,000 in 2018. It had the following amounts related to its pension plan in 2018: Actuarial liability gain \)10,000; Unexpected asset loss $14,000; Accumulated other comprehensive income (G/L) (beginning balance), zero. Determine for 2018 (a) Boey’s other comprehensive income, and (b) comprehensive income.

At the end of the current period, Oxford Ltd. has a defined benefit obligation of \(195,000 and pension plan assets with a fair value of \)110,000. The amount of the vested benefits for the plan is \(105,000. What amount related to its pension plan will be reported on the company’s statement of financial position? (a) \)5,000. (c) \(85,000. (b) \)90,000. (d) $20,000.
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