Leopard Ltd has a defined benefit superannuation plan where the present value of the accrued benefits on 1 January 20X6 was $850 000 and on 31 December 20X6 was $910 000.During 20X6 Leopard Ltd paid $80 000 to the plan.On 1 January 20X6 the net market value of the plans assets was $365 000 and on 31 December 20X6 was $468 000.Under the net-worth method the superannuation expense for the year ended 31 December 20X6 to be shown in Leopard's accounts is:

Question

Quizplus · Accepted Answer

Under the net-worth method, the superannuation expense is calculated as the increase in the present value of the accrued benefits during the year, adjusted for any contributions made to the plan.

Increase in present value of accrued benefits = $910,000 - $850,000 = $60,000

Contributions made to the plan = $80,000

Therefore, superannuation expense = $60,000 - $80,000 = -$20,000

Since the expense cannot be negative, it should be recognized as a reduction in the carrying amount of the plan assets, resulting in a net liability.

Net liability = ($468,000 - $365,000) - $20,000 = $83,000

Hence, the superannuation expense for the year ended 31 December 20X6 to be shown in Leopard's accounts is $37,000 ($80,000 - $83,000).

Leopard Ltd Has a Defined Benefit Superannuation Plan Where the Present