Prepaid pension expense will be eliminated

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Reference no: EM131262576

At December 31, 20X5, after making all adjustments related to its defined benefit pension plan, but before recognizing any additional pension liability, Domir Co. has accumulated the following information:

* It has prepaid pension expense on its balance sheet in the amount of $60,000.

* The vested benefit obligation (VBO) is $520,000.

* The accumulated benefit obligation (ABO) is $570,000.

* The projected benefit obligation (PBO) is $595,000.

* A cash contribution of $225,000 was made to the plan during the period.

* Unfunded and unamortized prior service cost increased from $90,000 to $120,000

* The fair value of plan assets is $580,000.

Ignoring any income tax effects, an entry, if required, to recognize an additional pension liability will have which of the following effects?

a. Prepaid pension expense will be eliminated and an accrued pension liability of $60,000 will be recognized.

b. There will be a $75,000 debit to other comprehensive income.

c. The fair value of plan assets is reduced by unfunded prior service cost.

d. Prepaid pension expense will decrease to $15,000.

Reference no: EM131262576

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