Question

Use the following information for the next three questions:

Information on Entity A's defined benefit plan is as follows:
PV of DBO - Jan. 1, 2018 2,000,000
FVPA - Jan. 1, 2018 1,800,000
PV of DBO - Dec. 31, 2018 2,900,000
FVPA, end - Dec. 31, 2018 2,600,000
Current service cost 400,000
Actuarial loss 200,000
Return on plan assets 120,000
Discount rate 10%
How much is the net defined benefit liability (asset) to be presented in Entity A's December 31, 2018 statement of financial position?
a. (300,000)
b. 300,000
c. (200,000)
d. 200,000

Answer 1

The net defined benefit liability (asset) to be presented in Entity A's December 31, 2018 statement of financial position is $100,000.

Step-by-step explanation:

The net defined benefit liability (asset) to be presented in Entity A's December 31, 2018 statement of financial position can be calculated by subtracting the present value of the defined benefit obligation (DBO) from the fair value of plan assets (FVPA) at the end of the year.

Using the given information:

1. Calculate the change in the DBO: PV of DBO - Dec. 31, 2018 - PV of DBO - Jan. 1, 2018 = 2,900,000 - 2,000,000 = 900,000
2. Calculate the change in the FVPA: FVPA, end - Dec. 31, 2018 - FVPA - Jan. 1, 2018 = 2,600,000 - 1,800,000 = 800,000
3. Calculate the net defined benefit liability (asset): Change in DBO - Change in FVPA = 900,000 - 800,000 = 100,000

Therefore, the net defined benefit liability (asset) to be presented in Entity A's December 31, 2018 statement of financial position is $100,000. The correct answer is option d. 200,000.