**Educational Content on Postretirement Benefit Plan Accounting**---At December 31, 2020, Mallory, Inc. reported in its balance sheet a net loss of $12 million related to its postretirement benefit plan. The actuary for Mallory at the end of 2021 increased her estimate of future health care costs. Mallory's entry to record the effect of this change will include:**Multiple Choice Options:**1. A debit to APBO and a credit to Loss-OCI.2. A debit to Postretirement benefit expense and a credit to APBO.3. A debit to Loss-OCI and a credit to APBO.4. A debit to Postretirement benefit expense and a credit to Loss-OCI.---In this exercise, the terms "APBO" and "Loss-OCI" are central to understanding the accounting for postretirement benefit plans. - **APBO (Accumulated Postretirement Benefit Obligation):** This represents the present value of the benefits estimated to be payable in the future as part of postretirement plans, excluding any part that is yet to be earned by active employees.- **Loss-OCI (Other Comprehensive Income):** This is a section of equity on the balance sheet where certain gains and losses are recorded that are not realized through typical income statement activities.To better understand the concept, students should study how changes in actuarial assumptions, like increased health care costs, influence the financial statements of a corporation.Answering this multiple-choice question correctly requires an understanding of how benefit plan estimates impact financial positions and the corresponding journal entries needed to adjust these estimates.

Loss-Other Comprehensive Income (OCI) is debited and Accumulated Post Benefit Obligation (APBO) is…

At December 31, 2020, Mallory, Inc. reported in its balance sheet a net loss of $12 million related to its postretirement benefit plan. The actuary for Mallory at the end of 2021 increased her estimate of future health care costs. Mallory's entry to record the effect of this change will include:

At December 31, 2020, Mallory, Inc. reported in its balance sheet a net loss of $12 million related to its postretirement benefit plan. The actuary for Mallory at the end of 2021 increased her estimate of future health care costs. Mallory's entry to record the effect of this change will include:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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