I'm stuck on this question and the answer doesn't help.
PBO $700,000
Plan asset $520,000
Pension cost $180,000
Pension contribution $150,000
Prior year's liability fully funded.
There were no recorded pension assets or liabilities on balance sheet.
Tax rate 40%
Question: what's the net effect of the requires adjustment on AOCI on end of year?
Answer says $90,000 decrease because
PBO-plan asset= $180,000 and
Pension cost-contribution= $30,000
So, 180,000-30,000= $150,000*40%= $60,000
$150,000-60,000= $90,000
What I don't get is
Why you subtract $30,000 from pension liability?
I thought the $30,000 is also liability so add to $180,000
Then $210,000*40%= $84,000
Effect $210,000-84,000= $126,000
Please someone help me!
PBO $700,000
Plan asset $520,000
Pension cost $180,000
Pension contribution $150,000
Prior year's liability fully funded.
There were no recorded pension assets or liabilities on balance sheet.
Tax rate 40%
Question: what's the net effect of the requires adjustment on AOCI on end of year?
Answer says $90,000 decrease because
PBO-plan asset= $180,000 and
Pension cost-contribution= $30,000
So, 180,000-30,000= $150,000*40%= $60,000
$150,000-60,000= $90,000
What I don't get is
Why you subtract $30,000 from pension liability?
I thought the $30,000 is also liability so add to $180,000
Then $210,000*40%= $84,000
Effect $210,000-84,000= $126,000
Please someone help me!