Question

Seigel Co. maintains a defined-benefit pension plan for its employees. At each balance sheet date, Seigel should report a pension asset / liability equal to the (CPA Adapted):a.difference between the projected benefit obligation and the accumulated benefit obligationb. projected benefit obligation.
c. funded status relative to the projected benefit obligation.
d.funded status relative to the accumulated benefit obligation.
e accumulated benefit obligation.

Answer 1

Answer:

C) funded status relative to the projected benefit obligation.

Explanation:

The reported liability for a pension asset/liability account is the unfunded projected benefit obligation. It is calculated by subtracting the fair value of the plan assets from the projected benefit obligation (PBO).

In this case, the funded status represents the fair value of the plan assets while the PBO represents the total amount of benefits that the pension plan should provide.

A pension liability account is required when the PBO is more than the fair value of the plan assets. If the fair value of the plan assets is higher than PBO, then a pension asset account is required.

Answer 2

Answer:

d.funded status relative to the accumulated benefit obligation.

Explanation:

Employees should be informed funded status relative to the accumulated benefit.