Van Nuen Inc. began a defined-benefit pension plan for its employees on January 1, 2018. The following data are provided for 2018, as of December 31, 2018:

Projected benefit obligation $ 785,000
Accumulated benefit obligation 740,000
Plan assets at fair value 655,000
Pension expense 715,000
Employer's cash contribution (end of year) 655,000

What amount should Van Nuen report as its net pension liability at December 31, 2018?

a. $45,000
b. $85,000
c. $130,000
d. $0

c. $130,000

Explanation:

The net pension liability is the difference between the total pension liability (the present value of projected benefit payments to employees based on their past service) and the assets (mostly investments reported at fair value) set aside to pay current employees, retirees, and beneficiaries.

To calculate this:

Net Pension Liability = Projected benefit Obligation - Plan assets at fair value

                                  = $ 785,000 - $655,000

                                  = $130,000

Therefore Van Nuen's net pension liability at December 31, 2018 can be reported as $130,000.

The answer is C $130,000

Explanation:

Using the formula

Net pension liability = Projected benefit obligation - Fair value of the plan Asset

Projected benefit obligation = $785,000

Fair value of the plan Asset = $655,000

785,000 - 655,000

= $130,000

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