How can eliminate negative income effect of pension dilemma


Nonvested Employees-An Ethical Dilemma

Response to the following problem:

Thinken Technology recently merged with College Electronix (CE), a computer graphics manufacturing firm. In performing a comprehensive audit of CE's accounting system, Gerald Ott, internal audit manager for Thinken Technology, discovered that the new subsidiary did not record pension assets and liabilities, subject to GAAP. The net present value of CE's pension assets was $15.5 million, the vested benefit obligation was $12.9 million, and the projected benefit obligation was $17.4 million. Ott reported this audit finding to Julie Habbe, the newly appointed controller of CE. A few days later, Habbe called Ott for his advice on what to do. Habbe started her conversation by asking, "Can't we eliminate the negative income effect of our pension dilemma simply by terminating the employment of nonvested employees before the end of our fiscal year?"

Instructions

How should Ott respond to Habbe's remark about firing nonvested employees?

 

Solution Preview :

Prepared by a verified Expert
Managerial Accounting: How can eliminate negative income effect of pension dilemma
Reference No:- TGS02123258

Now Priced at $20 (50% Discount)

Recommended (96%)

Rated (4.8/5)