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Question: Bill Haley is learning about pension accounting. He is convinced that in years when companies record liability gains and losses, total comprehensive income will not be affected. Is Bill correct? Explain.

Short Answer

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Answer

According to the stated situation, the assumption ofBill is not correct.

Step by step solution

01

Meaning of Comprehensive Income

Comprehensive income refers to the variations arising in an accounting period and includes the changes in the equity of the companyexcept for investments made by owners in terms of the liquid form of assets and distributions to them in terms of dividends.

02

Comment on Bill’s assumption

The assumption of Bill is incorrect.

In theaccounting process, the companies record liability gains and losses in the total comprehensive income. Also,the total comprehensive income is affected by the recording of liability gains and losses linked with pension plans because the gains and losses on pension plan assets are not realized until a future period.

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Most popular questions from this chapter

Manno Corporation has the following information available concerning its postretirement benefit plan for 2017. Service cost $40,000 Interest cost 47,400 Actual and expected return on plan assets 26,900 Compute Mannoโ€™s 2017 postretirement expense.

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For 2017, Carson Majors Inc. had pension expense of \(77 million and contributed \)55 million to the pension fund. Which of the following is the journal entry that Carson Majors would make to record pension expense and funding? (a) Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 55,000,000 (b) Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 99,000,000 (c) Pension Expense 55,000,000 Pension Asset/Liability 22,000,000 Cash 77,000,000 (d) Pension Expense 22,000,000 Pension Asset/Liability 55,000,000 Cash 77,000,000

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