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ONLY monetary accounts flucuate due to rate change
In a remeasurement - ONLY monetary accounts are revalued at Current Rates. The financial accounting term monetary items refers to those assets and liabilities whose value is measured and stated in cash. Examples of monetary assets include cash, accounts receivable, notes receivable, and investments.
In the question below, why does it say: "As a result, an additional liability of $150,000 is required." I thought we already figured out that the liability was $30K?? TIA. Arroz Corporation implemented a defined benefit pension plan for its employees on January 2, 20X4. The following data are provided for 20X6 and as of December 31, 20X6: Projected benefit obligation $600,000 Accumulated benefit obligation 550,000 Plan assets at fair value 420,000 Pension cost for 20X6 180,000 Pension contribution for 20X6 150,000 Assume that as of January 1, 20X6, Arroz’s pension plan was fully funded, and there were no recorded pension assets or liabilities on the balance sheet. Assuming a tax rate of 40%, what is the net effect of the required adjustment on accumulated other comprehensive income on December 31, 20X6? A. $0 B. $108,000 decrease. C. $36,000 decrease. D. $90,000 decrease. ANSWER: The plan is underfunded by $180,000, the amount by which the PBO of $600,000 exceeds the plan assets of $420,000, requiring that the entity recognize a liability in that amount. With pension cost of $180,000 in the current year and a contribution of $150,000, the entity would recognize an accrued liability for the difference of $30,000. As a result, an additional liability of $150,000 is required. The tax effect of ($150,000 x 40%) $60,000 will be recognized as a deferred tax asset and the remaining $90,000 would be a decrease to OCI.