Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 20: Question 23Q (page 1161)

Describe the reporting of pension plans for a company with multiple plans, some of which are underfunded and some of which are overfunded.

Short Answer

Expert verified

An underfunded pension planis the type of plan an organization carries in which thevalue of pension liabilityismore than the value of pension assets. Themain reasonfor underfunding is caused due tolosses incurred in investmentsof the firm.

Step by step solution

01

Introduction

Organizations generally combine various amounts that are similar in nature under one head in the balance sheet. In simple words, amounts that require more funds to operate are headed under the column of underfunded, and on the other hand, payments that have excess funds are reported under the head of overfunded.

02

Reporting of the pension plans, some of which are underfunded and some are overfunded

Organizations report the total amount of overfunded or underfunded pension plans under the head of pension asset/liability in the balance sheet.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

For Warren Corporation, year-end plan assets were \(2,000,000. At the beginning of the year, plan assets were \)1,780,000. During the year, contributions to the pension fund were \(120,000, and benefits paid were \)200,000. Compute Warren’s actual return on plan assets.

Question: Kramer Co. has prepared the following pension worksheet. Unfortunately, several entries in the worksheet are not decipherable. The company has asked your assistance in completing the worksheet and completing the accounting tasks related to the pension plan for 2017.

Instructions (a) Determine the missing amounts in the 2017 pension worksheet, indicating whether the amounts are debits or credits. (b) Prepare the journal entry to record 2017 pension expense for Kramer Co. (c) Determine the following for Kramer for 2017: (1) settlement rate used to measure the interest on the liability and (2) expected return on plan assets.

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

Villa Company has experienced tough competition, leading it to seek concessions from its employees in the company’s pension plan. In exchange for promises to avoid layoffs and wage cuts, the employees agreed to receive lower pension benefits in the future. As a result, Villa amended its pension plan on January 1, 2017, and recorded negative past service cost of \(125,000. Current service cost for 2017 is \)26,000. Interest expense is \(9,000, and interest revenue is \)2,500. Actual return on assets in 2017 is $1,500. Compute Villa’s pension expense in 2017.

Question: What is service cost, and what is the basis of its measurement?
See all solutions

Recommended explanations on Business Studies Textbooks

Business Case Studies

Read Explanation

Strategic Analysis

Read Explanation

Corporate Finance

Read Explanation

Introduction to Business

Read Explanation

Organizational Behavior

Read Explanation

Operational Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free