Net Gain or Loss Hudson Company's actuary has provided the following information concerning the company's defined benefit pension plan at the end of 2016: Fair value of plan assets (1/1/2016) $350,000 Actual projected benefit obligation (1/1/2016) 360,000 Expected projected benefit obligation (1/1/2016) 424,000 Average remaining service life of employees 10 years The difference between the actual and expected projected benefit obligation first occurred in 2015. Required: 1. Compute the amount of the gain or loss for Hudson's pension plan at the beginning of 2016. Assuming that Hudson uses the corridor approach. at beginning of 2016 s 2. Compute the amount of the net gain or loss to include in Hudson's pension expense for 2016. Indicate whether it is an addition to or a subtraction from pension expense. Net recognized in 2016 - pension expense $ 3. If the Hudson Company is using IFRS, how would the gain or loss be treated? a. Hudson would immediately recognize the gain or loss as other comprehensive income. b. Hudson would amortize the gain or loss using the corridor approach. c. Hudson would use any systematic and rational approach that results in slower amortization than the corridor approach. d. Hudson would immediately recognize the gain or loss in net income in the period it occurs.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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**Net Gain or Loss**

Hudson Company's actuary has provided the following information concerning the company's defined benefit pension plan at the end of 2016:

- Fair value of plan assets (1/1/2016): $350,000
- Actual projected benefit obligation (1/1/2016): $360,000
- Expected projected benefit obligation (1/1/2016): $424,000
- Average remaining service life of employees: 10 years

The difference between the actual and expected projected benefit obligation first occurred in 2015.

**Required:**

1. Compute the amount of the gain or loss for Hudson's pension plan at the beginning of 2016. Assuming that Hudson uses the corridor approach. *[                 at beginning of 2016 $               ]*
   
2. Compute the amount of the net gain or loss to include in Hudson's pension expense for 2016. Indicate whether it is an addition to or a subtraction from pension expense.
   
   *Net [                   ] recognized in 2016 [                   ] pension expense $[             ]*

3. If the Hudson Company is using IFRS, how would the gain or loss be treated?
   a. Hudson would immediately recognize the gain or loss as other comprehensive income.
   b. Hudson would amortize the gain or loss using the corridor approach.
   c. Hudson would use any systematic and rational approach that results in slower amortization than the corridor approach.
   d. Hudson would immediately recognize the gain or loss in net income in the period it occurs.
   
   *[                 ]*

(Here, the text is presented with interactive fill-in-the-blanks, typically meant for student engagement and practice.)
Transcribed Image Text:**Net Gain or Loss** Hudson Company's actuary has provided the following information concerning the company's defined benefit pension plan at the end of 2016: - Fair value of plan assets (1/1/2016): $350,000 - Actual projected benefit obligation (1/1/2016): $360,000 - Expected projected benefit obligation (1/1/2016): $424,000 - Average remaining service life of employees: 10 years The difference between the actual and expected projected benefit obligation first occurred in 2015. **Required:** 1. Compute the amount of the gain or loss for Hudson's pension plan at the beginning of 2016. Assuming that Hudson uses the corridor approach. *[                 at beginning of 2016 $               ]* 2. Compute the amount of the net gain or loss to include in Hudson's pension expense for 2016. Indicate whether it is an addition to or a subtraction from pension expense. *Net [                   ] recognized in 2016 [                   ] pension expense $[             ]* 3. If the Hudson Company is using IFRS, how would the gain or loss be treated? a. Hudson would immediately recognize the gain or loss as other comprehensive income. b. Hudson would amortize the gain or loss using the corridor approach. c. Hudson would use any systematic and rational approach that results in slower amortization than the corridor approach. d. Hudson would immediately recognize the gain or loss in net income in the period it occurs. *[                 ]* (Here, the text is presented with interactive fill-in-the-blanks, typically meant for student engagement and practice.)
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