The following is the only information pertaining to Kane Co.âs defined benefit pension plan:Pension asset, January 1, Year 1 $ 2,000Service cost 19,000Interest cost 38,000Actual and expected return on plan assets 22,000Amortization of prior service cost arising in a prior period 52,000Employer contributions 40,000In its December 31, Year 1, balance sheet, what amount should Kane report as the unfunded or overfunded projected benefit obligation (PBO)?(A) $ 7,000 overfunded.(B) $15,000 underfunded.(C) $45,000 underfunded.(D) $52,000 underfunded.

Answers

Answer 1
Answer:

Answer:

option (a) is correct answer '$ 7,000 overfunded'

Explanation:

Data:

Pension asset, January 1, Year 1 = $ 2,000

Service cost = $ 19,000

Interest cost = $ 38,000

Actual and expected return on plan assets = $ 22,000

Amortization of prior service cost arising in a prior period = $ 52,000

Employer contributions = $ 40,000

Total expenses = Service cost + Interest cost = $ 19,000 + $ 38,000  

= $ 57000

Now,

projected benefit obligation (PBO) = (Pension asset + Actual and expected return ) - Total expenses

or

projected benefit obligation (PBO)

= $ 2,000 + $ 22,000 + $ 40,000 - $ 57000

or

overfunded projected benefit obligation (PBO) = $ 7,000

hence,

option (a) is correct answer '$ 7,000 overfunded'


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