Answered: What is the amount to be reported as…

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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On September 1, 2016, Reality Corporation offered special termination benefits to employees who had reached the early age retirement specified on the company’s pension plan. Termination benefits consists of:

Lump sum and periodic future payments.

The employees accepting the company offer receive the usual early retirement pension benefits. The offer expires on November 30, 2016.

Actual or reasonably estimated amounts on December 31, 2016 relating to the employees accepting the offer are the following:

Lump sum payments made 574,000 on January 1, 2017.
Present value of periodic payments 155,000 of $60,000 annually for 3 years which will begin January 1, 2017.
Reduction of accrued pension cost of 45,000 on December 31, 2016 for the terminating employees.

What is the amount to be reported as total liability for termination benefits on December 31, 2016?

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