Accounting for Defined Benefit Plans
Pension expense (typically buried within the SG&A category) is determined and created on the income statement. The offsetting balance sheet entry (in order to make the balance sheet balance) appears in one of the following forms:
A liability, if the amount of cash contribution on the behalf of a company is smaller than the pension expense recorded on the income statement
Prepaid expense asset, if the amount of cash contribution on the behalf of a company is greater than the pension expense recorded on the income statement
13. Lemonade Stand
Exercise
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13. Lemonade Stand
Solution
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