A company has a defined benefit pension plan for its employees. On December 31, year one, the accumulated benefit obligation is $45,900, the projected benefit obligation is $68,100, and the fair value of the plan assets is $62,000. What amount, if any, related to the defined benefit plan should be recognized in the balance sheet at December 31, year one? Group of answer choices

The firm has an underfunded plan and reports a ($4,100) liability

Explanation:

IF a company has a defined benefit pension plan for its employees, and On December 31, year one, the accumulated benefit obligation is $45,900, the projected benefit obligation is $68,100, and the fair value of the plan assets is $62,000.

The amount, related to the defined benefit plan should be recognized in the balance sheet at December 31, year one is the net off Projected Benefit Obligation and Fair value of the plan assets

Which is $68,100 - $62,000 = $4,100

The firm has an underfunded plan and reports a ($4,100) liability

B) A liability of $6,100.

Explanation:

pension liability = projected benefit obligation - fair value of plan assets = $68,100 - $62,100 = $6,100

Since the projected obligations of the pension plan are higher than the fair value of the plan, the plan shows a deficit that will be assumed by the company. Only the liability must be included in the balance sheet, but both the project obligations and fair value of the plan must be included in the footnotes.

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