Final answer:
Sheridan Corp.'s net defined benefit liability as of December 31, 2023, is $1,196,000. This is calculated by subtracting the fair value of the pension plan assets from the defined benefit obligation, as the obligation exceeds the asset value. The correct answer is option b.
Step-by-step explanation:
To determine the net defined benefit liability/asset for Sheridan Corp., we must compare the fair value of the plan assets to the defined benefit obligation. As of December 31, 2023, we are given that the fair value of the plan assets is $5,020,000, and the defined benefit obligation is $6,216,000.
Under International Financial Reporting Standards (IFRS), when the defined benefit obligation exceeds the fair value of the plan assets, the difference is recognized as a liability. Conversely, if the plan assets exceed the defined benefit obligation, the excess is recognized as an asset. In this case, the defined benefit obligation is greater than the fair value of the plan assets.
Therefore, to calculate the net defined benefit liability, we subtract the fair value of the plan assets from the defined benefit obligation: $6,216,000 - $5,020,000 = $1,196,000 liability.
Accordingly, on Sheridan Corp.'s December 31, 2023 statement of financial position, a net defined benefit liability of $1,196,000 should be reported.