Business, 28.06.2019 06:10 crawford184232323234

At year-end, a company has a defined benefit pension plan with a projected benefit obligation of $350,000, a net gain of $140,000 that was not previously recognized in net periodic pension cost and prior service cost of $210,000 that was not previously recognized in net periodic pension cost. what amount should be reported in accumulated other comprehensive income related to the company's defined benefit pension plan at year end?
a debit balance of $70,000
a debit balance of $420,000
a credit balance of $70,000
a credit balance of $420,000

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Answer from: reese12345

A debit Balance of $420,000

Explanation:

Accumulated other comprehensive income (OCI):

Is were accounting puts the expenses, gains and losses of investment and pension fund or foreing currency in their transactions which are unrealized. This means, this result are moved directly to the equity section and do not affect the net income.

The Projected benefit Obligation (PBO):

Will be the present value of found pension. It is the ammount required now to cover future pension obligations to its employees.

Pension Serivce Cost

Means the present value of the projected retirement benefits earned by the employees in the current period. It should be the ammount save to pay the future retirement of the employees.

The ammount of funding will vary base on the plan's gains and losses, the return of the fund's assets and the previous service cost (if we are matching the service cost with the projected benefit obligation)

Now moving to accounting:

the projected obligation of 350,000 CREDIT

we have a prior service cost of 210,000 CREDIT

and we need to recognize

a net-gain in the fund for 140,000 DEBIT

So Other Comprehensive income will be a debit for 420,000 to balance the entry.

Remember. This will be not be display in the income statment,

and next year the Projected benefit obligation can change as well as the gain in the fund or the pesion service cost, the values will change each year because new employee can be hired, other can retire or be fire, and several other factors.

This is how you will deal with changes:

changes in the service cost, just place the value of service cost done by the company.changes in the gain, place the new gain or loss in the fundchanges in the PBO youwill adjust the value to move the balance to the next projected benefit obligation

Answer from: Quest

$2.00 for three shots.

Answer from: Quest

The statement is true

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At year-end, a company has a defined benefit pension plan with a projected benefit obligation of $35...

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