Webb Co. implemented a defined benefit pension plan for its employees on January
ID: 2438435 • Letter: W
Question
Webb Co. implemented a defined benefit pension plan for its employees on January 1, Year 1. During Year 1 and Year 2, Webb’s contributions fully funded the plan. The following data are provided for Year 4 and Year 3:
Year 4 Year 3
Estimated Actual
Projected benefit obligation, 12/31 $750,000 $700,000
Accumulated benefit obligation, 12/31 520,000 500,000
Plan assets at fair value, 12/31 675,000 600,000
Projected benefit obligation in excess of plan assets 75,000 100,000
Pension expense 90,000 75,000
Employer’s contribution ? 50,000
What amount should Webb contribute to report a pension liability of $15,000 in its December 31, Year 4, balance sheet?
a. $ 50,000
b. $ 60,000
c. $ 75,000
d. $100,000
Show all work including formulas
Explanation / Answer
b. $ 60,000
Notes
Pension liability = Projected benefit obligation - Plan assets at fair value
= ($750,000 - $675,000)
=$75,000
Webb wants to report a pension liability of $15,000 Hence the contrbution to be made =75000-15000
=$60000
e sheet date. If Webb projects this excess to be $75,000 ($750,000 - $675,000) at the end of Year 4 and wishes to report a liability of $15,000, a contribution of $60,000 ($75,000 - $15,000) will have to be made.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.