Question

Logan Corp., a company whose stock is publicly traded, provides a noncontributory defined-benefit pension plan for its employees. The company's actuary has provided the following information for the year ended December 31, 2013:

projected benefit obligation $650,000.00
accumulated benefit obligation $525,000.00
fv of plan assets $825,000.00
service cost $240,000.00
interest on projected benfit obligation $24,000.00
amortization of prior service cost $60,000.00
expected and actual return on plan assets $82,500.00

The market-related asset value equals the fair value of plan assets. No contributions have been made for 2013 pension cost. In its December 31, 2013 balance sheet, Logan should report a pension asset / liability of _____________.

Answer 1

Logan Corp. should report a pension asset of $175,000.00 on its December 31, 2013 balance sheet, calculated as the difference between the fair value of plan assets ($825,000.00) and the projected benefit obligation ($650,000.00).

Step-by-step explanation:

To determine the pension asset or liability for Logan Corp., we need to calculate the funded status of the pension plan. This is done by comparing the fair value of the plan assets with the projected benefit obligation (PBO).

The fair value of the plan assets is given as $825,000.00, and the PBO is $650,000.00. To determine if there is a pension asset or liability, we subtract the PBO from the fair value of plan assets:

Funded Status = Fair Value of Plan Assets - Projected Benefit Obligation

Funded Status = $825,000.00 - $650,000.00

Funded Status = $175,000.00

Since the result is positive, Logan Corp. has a pension asset. Therefore, in its December 31, 2013 balance sheet, Logan should report a pension asset of $175,000.00.