Question

On June 1, 20x8, Fox Corp. established a defined benefit pension plan for its employees. The following information was available at May 31, 20x9: Projected benefit obligation $ 14,500,000 Accumulated benefit obligation 12,000,000 Unfunded accrued pension cost 200,000 Plan assets at fair market value 7,000,000 Unrecognized prior service cost 2,550,000 What is the funded status of Ward's pension plan at May 31, 20x9?

Answer 1

Answer:

The funded status of Ward's pension plan at May 31,20x9 will be:

$7500000 underfunded

Explanation:

The underfunded or overfunded status of a pension plan can be calculated by comparing Plan assets at fair market value with the Projected benefit obligation.

If the Plan assets at fair market value are greater than Project benefit obligation then the pension plan will be overfunded.

If the Plan assets at fair market value are less than Project benefit obligation then the pension plan will be underfunded.

In order to determine the overfunded/underfunded status of the Fox Corp, the following calculation shall be made:

(underfunded)/overfunded=$7000000-$14500000=($7500000)

In the above calculation $7000000 represents Plan assets at fair market value and $14500000 represents Project benefit obligation and since the the Plan assets at fair market value are less than Project benefit obligation by $7500000, therefore the funded status of Ward's pension plan at May 31, 20x9 will be:

$7500000 underfunded