1. Nome Co. sponsors a defined benefit plan covering all employees. Benefits are based on years of service and compensation levels at the time of retirement. Nome determined that, as of September 30, year 2, its accumulated benefit obligation was $380,000, and its plan assets had a $290,000 fair value. The projected benefit obligation on September 30, year 2, was $400,000. In its September 30, year 2 balance sheet, what amount should Nome report as pension liability? $380,000 $110,000 $400,000 $ 90,000

Respuesta :

Answer:

$110,000

Explanation:

There is pension liability for a corporation when the the projected benefit obligation (PBO) is greater than the fair value of plan assets. Therefore, pension liability is obtained by simply deducting the fair value of plan assets from the PBO as follows:

Pension liability = $400,000 - $290,000 = $110,000

Therefore, Nome should report $110,000 as pension liability in its September 30, year 2 balance sheet.