Question

38. Gage began a defined benefit pension plan on January 1, 2014. During 2014, the service cost was $450,000. Gage contributed $450,000 to the pension plan for 2014. The actuary said the projected benefit obligation at December 31, 2014 was $450,000. As of December 31, 2014, what statements can Gage make about the pension plan?

I.
The pension plan is fully funded.
II.
Gage does not need to report a liability regarding the pension plan at December 31, 2014.


A. I
B. II
C. both I and II
D. neither I nor II

Answer 1

Gage can make the following statements about the pension plan: I. The pension plan is fully funded, and II. Gage does not need to report a liability regarding the pension plan at December 31, 2014.

Step-by-step explanation:

As of December 31, 2014, Gage can make the following statements about the pension plan:

1. I. The pension plan is fully funded. Gage contributed $450,000 to the pension plan for 2014, which covers the service cost for the same year. This means that the contributions made by Gage are equal to the cost of the pension plan, indicating that it is fully funded.
2. II. Gage does not need to report a liability regarding the pension plan at December 31, 2014. The actuary stated that the projected benefit obligation at December 31, 2014, was $450,000, which matches the contribution made by Gage. When the projected benefit obligation is fully funded, there is no liability to be reported.