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Chapter 20: Q17Q. (page 1161)

How does an “asset gain or loss” develop in pension accounting? How does a “liability gain or loss” develop in pension accounting?

Short Answer

Expert verified

Pension accounting is a terminology where the attributes of the pension plan arerecorded according to their nature and date of occurrence. Each amount is magnified under the pension worksheet and is recorded in relevant financial statements.

Step by step solution

01

Asset gain or loss in pension accounting

In pension accounting, when the actual return on plan assets is more than the expected return, it is recorded as an asset gain. On the other hand, when the expected return on plan assets exceeds the actual return on plan assets, it is reported as asset loss.

02

Liability gain or loss in pension accounting

When an organization experiences an uncertain or unexpected decrease in the value of pension obligation, it is regarded as a liability gain. On the other hand, when the organization notices an increase in pension obligation, it is reported as liability loss.

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Most popular questions from this chapter

What is the meaning of “corridor amortization”?

For 2017, Sampsell Inc. computed its annual postretirement expense as \(240,900. Sampsell’s contribution to the plan during 2017 was \)180,000. Prepare Sampsell’s 2017 entry to record postretirement expense, assuming Sampsell has no OCI amounts.

Kenseth Corp. has the following beginning-of-the-year present values for its projected benefit obligation and market-related values for its pension plan assets. Projected Plan Benefit Assets Obligation Value 2016 \(2,000,000 \)1,900,000 2017 2,400,000 2,500,000 2018 2,950,000 2,600,000 2019 3,600,000 3,000,000 The average remaining service life per employee in 2016 and 2017 is 10 years and in 2018 and 2019 is 12 years. The net gain or loss that occurred during each year is as follows: 2016, \(280,000 loss; 2017, \)90,000 loss; 2018, \(11,000 loss; and 2019, \)25,000 gain. (In working the solution, the gains and losses must be aggregated to arrive at year-end balances.) Instructions Using the corridor approach, compute the amount of net gain or loss amortized and charged to pension expense in each of the four years, setting up an appropriate schedule.

Differentiate between “accounting for the employer” and “accounting for the pension fund.”

At the end of the current period, Agler Inc. had a projected benefit obligation of \(400,000 and pension plan assets (at fair value) of \)350,000. What are the accounts and amounts that will be reported on the company’s balance sheet as pension assets or pension liabilities?
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