Question

At the end of the current year, Joshua Co. has a defined benefit obligation of \(335,000 and pension plan assets with a fair value of \)345,000. The amount of the vested benefits for the plan is \(225,000. Joshua has a liability gain of \)8,300 (beginning accumulated OCI is zero). What amount and account(s) related to its pension plan will be reported on the company’s statement of financial position?

Short answer

Answer

The company should report $8,300 as other comprehensive gains.

Step-by-step solution

Step-by-Step SolutionStep 1: Meaning of Equity

In accounting, equity refers to the amount which belongs to the shareholders of the company. Equity reflects the amount payable to thecommon stockholdersafter settling all the liabilities and dues of preference stockholders.

Reporting on financial statements

According to the above-given information, Joshua Company would report$10,000as a pension asset, i.e., the difference between the defined benefit obligation and plan assets’ fair value.

In addition, $8,300 should be reported in the equity section of the company asother comprehensive gains.