Question

At the end of the current year, Kennedy Co. has a defined benefit obligation of \(335,000 and pension plan assets with a fair value of \)245,000. The amount of the vested benefits for the plan is \(225,000. Kennedy has an actuarial gain of \)8,300. What account and amount(s) related to its pension plan will be reported on the company’s statement of financial position? (a) Pension Liability and \(74,300. (b) Pension Liability and \)90,000. (c) Pension Asset and \(233,300. (d) Pension Asset and \)110,000.

Short answer

Option (b) pension liability and $90,000 is the correct answer.

Step-by-step solution

Funded plans 

Funded plans are those types of pension plans that arefully funded by the employer and have sufficient value of assets so that the current and future benefits can be secured.

Calculations

The amount of defined benefit obligation is more than the actual fair value of the plan assets. Therefore, it will be recorded as pension liability.

Particulars	Amount
Defined benefit obligation	$335,000
Less: Pension plan assets	$245,000
Amount related to pension plan	$90,000