Linseed has Noncontributory, Funded, Defined Benefit Pension Plan. As of 12-31-2016, the projected benefit obligation (PBO)...
Linseed has Noncontributory, Funded, Defined Benefit Pension Plan. As of 12-31-2016, the projected benefit obligation (PBO) was $468,000. As of 12-31-2016, the fair value of the pension plan assets was $544,000. As do may companies, Linseed tries to minimize its reported liabilities on the balance sheet while complying with generally accepted accounting principles (GAAP). On its 12-31-2016 balance sheet Linseed will report a
Homework Answers
A company reports a pension asset on its balance sheet when the fair value of plan assets is higher than the present value of pension benefits i.e. Projected Benefit obligation. It reports a pension liability when PBO is higher than the fair value of plan assets.
In this case, fair value of pension plan assets is higher than the PBO, hence Linseen will report a pension asset on its balance sheet.
Pension asset = Fair value of plan assets - PBO = $544,000 - $468,000 = $76,000
On its 12-31-2016 balance sheet Linseed will report a Pension asset of $76,000.
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Linseed has Noncontributory, Funded, Defined Benefit Pension
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