Starfish, Inc. discloses the following pension footnote in its 2020 10-K report (in millions): U.S. Pension Benefits 2020 Change in benefit obligation Benefit obligation, beginning of year $15,792 Service cost 119 Interest cost 517 Plan amendments --- Actuarial losses (gains) 767 Foreign currency exchange rates --- Participant contributions --- Benefits paid - gross (970 ) Less: federal subsidy on benefits paid --- Curtailments, settlements and termination benefits (7 ) Benefit obligation, end of year $16,218 The fair value of Starfish’s U.S. pension assets is $11,354 million as of 2020. What is the funded status of the plan, and how will this be reflected on Starfish’s balance sheet? Select one: A. The pension plan is underfunded by $4,438 million and is reported as a liability on the company’s balance sheet. B. The pension plan is overfunded by $4,438 million and is reported as an asset on the company’s balance sheet. C. The pension plan is underfunded by $6,804 million and is reported as a liability on the company’s balance sheet. D. The pension plan is overfunded by $4,864 million and is reported as an asset on the company’s balance sheet. E. The pension plan is underfunded by $4,864 million and is reported as a liability on the company’s balance sheet.

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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Starfish, Inc. discloses the following pension footnote in its 2020 10-K report (in millions):

U.S. Pension Benefits	2020
Change in benefit obligation
Benefit obligation, beginning of year	$15,792
Service cost	119
Interest cost	517
Plan amendments	---
Actuarial losses (gains)	767
Foreign currency exchange rates	---
Participant contributions	---
Benefits paid - gross	(970	)
Less: federal subsidy on benefits paid	---
Curtailments, settlements and termination benefits	(7	)
Benefit obligation, end of year	$16,218

The fair value of Starfish’s U.S. pension assets is $11,354 million as of 2020.

What is the funded status of the plan, and how will this be reflected on Starfish’s balance sheet?

Select one:

A. The pension plan is underfunded by $4,438 million and is reported as a liability on the company’s balance sheet.

B. The pension plan is overfunded by $4,438 million and is reported as an asset on the company’s balance sheet.

C. The pension plan is underfunded by $6,804 million and is reported as a liability on the company’s balance sheet.

D. The pension plan is overfunded by $4,864 million and is reported as an asset on the company’s balance sheet.

E. The pension plan is underfunded by $4,864 million and is reported as a liability on the company’s balance sheet.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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