Chapter 17, Problem 3CPA

To determine

Defined benefit pension plans: In such plans, employers pay annual fixed contributions to employees as retirement benefits. Employers promise to pay fixed retirement benefits, which are computed based on the service period of employee, annual compensation of the employee, and age. 

Net pension liability: If the balance of projected benefit obligation (PBO) is more than plan assets, the difference is referred to as underfunded status, and reported as net pension liability on the balance sheet.

To identify: The net effect of decline in projected benefit obligation by $8,000,000 and a loss in return on plan assets $\left(\text{\$16,000,000}\left(\text{actual}\right)\text{–\$18,000,000}\left(\text{expected}\right)\right)$ in the books of Corporation J.