Question

In: Accounting

Major Medical reported a net loss–AOCI in last year’s balance sheet. This year, the company revised...

Major Medical reported a net loss–AOCI in last year’s balance sheet. This year, the company revised its estimate of future salary levels causing its PBO estimate to decline by $12 million. Also, the $22 million actual return on plan assets fell short of the $24 million expected return.

How does this gain and loss affect Major’s income statement, statement of comprehensive income, and balance sheet?

Solutions

Expert Solution

Solution:

The effect of the gain and loss income statement, statement of comprehensive income, and balance sheet:

Description Amount(in million)
Income statement
    Net income $0
Comprehensive income statement
    Gain - OCI $12
    Loss - OCI $2
Balance sheet
    Net pension liability decreases by $10
    Net loss- AOCI decreases by $10

working note 1:

compute the gain OCI and loss OCI in the following manner:

Date Account Title and Explanation Debit(million) Credit(million)
PBO $12
         Gain OCI $12
(To record the gain from the change in assumption)
Loss OCI(24 -22) $2
         Plan assets $2
(To record the loss from the actual return falling short of expected returns)

Working note 2:

Compute the net pension liability and the net loss AOCI in the following manner:

Description Amount (million)
Plan assets $2
Less: PBO ($12)
Net pension liability decrease ($10)
Loss -OCI $2
Less Gain OCI ($12)
Net loss - AOCI decrease ($10)

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Westerville Company reported the following results from last year’s operations:
  Westerville Company reported the following results from last year’s operations:       Sales $ 1,000,000   Variable expenses   300,000           Contribution margin   700,000     Fixed expenses   500,000           Net operating income $ 200,000           Average operating assets $ 625,000           This year, the company has a $120,000 investment opportunity with the following cost and revenue characteristics:       Sales $ 200,000     Contribution margin ratio   60 % of...
Find the ‘best fit’ equation of net income for last year on last year’s sales. Test...
Find the ‘best fit’ equation of net income for last year on last year’s sales. Test the significance of the overall model at 1% level of significance. Company Market value Sales Profits Assets Recent share price P-E Ratio Yield 1 42926 9663 2446.6 11086 38 18 2.67 2 31557 37799 975.0 38870 47 33 3.76 3 19143 7230 1093.5 9590 59 18 2.85 4 9915 4908 737.6 19429 46 16 6.66 5 9094 989 267.7 1203 30 37 0.00 6...
A manufacturing company producing medical devices reported $108,000,000 in sales over the last year. At the...
A manufacturing company producing medical devices reported $108,000,000 in sales over the last year. At the end of the same year, the company had $42,000,000 worth of inventory of ready-to-ship devices. a. Assuming that units in inventory are valued (based on COGS) at $2,000 per unit and are sold for $4,000 per unit, what are the annual inventory turns? The company uses a 20 percent per year cost of inventory. That is, for the hypothetical case that one unit of...
Burns Corporation's net income last year was $92,800. Changes in the company's balance sheet accounts for...
Burns Corporation's net income last year was $92,800. Changes in the company's balance sheet accounts for the year appear below: Increases (Decreases) Asset and Contra-Asset Accounts: Cash and cash equivalents $ 21,300 Accounts receivable $ 13,400 Inventory $ (17,600 ) Prepaid expenses $ 4,200 Long-term investments $ 11,000 Property, plant, and equipment $ 71,400 Accumulated depreciation $ 33,500 Liability and Equity Accounts: Accounts payable $ (18,400 ) Accrued liabilities $ 17,000 Income taxes payable $ 4,200 Bonds payable $ (64,200...
Burns Corporation's net income last year was $98,300. Changes in the company's balance sheet accounts for...
Burns Corporation's net income last year was $98,300. Changes in the company's balance sheet accounts for the year appear below: Increases (Decreases) Asset and Contra-Asset Accounts: Cash and cash equivalents $ 25,000 Accounts receivable $ 14,200 Inventory $ (17,100 ) Prepaid expenses $ 4,100 Long-term investments $ 11,000 Property, plant, and equipment $ 72,100 Accumulated depreciation $ 33,800 Liability and Equity Accounts: Accounts payable $ (19,600 ) Accrued liabilities $ 17,300 Income taxes payable $ 4,200 Bonds payable $ (62,400...
Burns Corporation's net income last year was $96,500. Changes in the company's balance sheet accounts for...
Burns Corporation's net income last year was $96,500. Changes in the company's balance sheet accounts for the year appear below: Increases (Decreases) Asset and Contra-Asset Accounts: Cash and cash equivalents $ 18,600 Accounts receivable $ 13,300 Inventory $ (16,300 ) Prepaid expenses $ 4,300 Long-term investments $ 10,300 Property, plant, and equipment $ 74,200 Accumulated depreciation $ 31,600 Liability and Equity Accounts: Accounts payable $ (19,400 ) Accrued liabilities $ 17,600 Income taxes payable $ 4,200 Bonds payable $ (63,600...
Megan Corporation's net income last year was $101,000. Changes in the company's balance sheet accounts for...
Megan Corporation's net income last year was $101,000. Changes in the company's balance sheet accounts for the year appear below: Increases (Decreases) Asset and Contra-Asset Accounts: Cash and cash equivalents $ (5,400 ) Accounts receivable $ (17,000 ) Inventory $ 4,500 Prepaid expenses $ (9,100 ) Long-term investments $ 83,000 Property, plant, and equipment $ 61,000 Accumulated depreciation $ 64,000 Liability and Equity Accounts: Accounts payable $ 0 Accrued liabilities $ 17,020 Income taxes payable $ (12,120 ) Bonds payable...
Burns Corporation's net income last year was $94,600. Changes in the company's balance sheet accounts for...
Burns Corporation's net income last year was $94,600. Changes in the company's balance sheet accounts for the year appear below: Increases (Decreases) Asset and Contra-Asset Accounts: Cash and cash equivalents $ 17,000 Accounts receivable $ 13,300 Inventory $ (16,600 ) Prepaid expenses $ 4,300 Long-term investments $ 10,300 Property, plant, and equipment $ 73,500 Accumulated depreciation $ 31,600 Liability and Equity Accounts: Accounts payable $ (18,400 ) Accrued liabilities $ 17,100 Income taxes payable $ 4,200 Bonds payable $ (64,200...
Burns Corporation's net income last year was $97,400. Changes in the company's balance sheet accounts for...
Burns Corporation's net income last year was $97,400. Changes in the company's balance sheet accounts for the year appear below: Increases (Decreases) Asset and Contra-Asset Accounts: Cash and cash equivalents $ 22,700 Accounts receivable $ 13,800 Inventory $ (16,800 ) Prepaid expenses $ 4,400 Long-term investments $ 10,400 Property, plant, and equipment $ 71,400 Accumulated depreciation $ 32,600 Liability and Equity Accounts: Accounts payable $ (19,400 ) Accrued liabilities $ 17,100 Income taxes payable $ 4,100 Bonds payable $ (64,800...
Burns Corporation's net income last year was $96,500. Changes in the company's balance sheet accounts for...
Burns Corporation's net income last year was $96,500. Changes in the company's balance sheet accounts for the year appear below:    Increases (Decreases) Asset and Contra-Asset Accounts: Cash and cash equivalents $ 18,600 Accounts receivable $ 13,300 Inventory $ (16,300 ) Prepaid expenses $ 4,300 Long-term investments $ 10,300 Property, plant, and equipment $ 74,200 Accumulated depreciation $ 31,600 Liability and Equity Accounts: Accounts payable $ (19,400 ) Accrued liabilities $ 17,600 Income taxes payable $ 4,200 Bonds payable $...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT