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NEW QUESTION: 1
Lauren Jacobs, CFA, is an equity analyst for DF Investments. She is evaluating Iron Parts Inc. Iron Parts is a manufacturer of interior systems and components for automobiles. The company is the world's second largest original equipment auto parts supplier, with a market capitalization of $1.8 billion. Based on Iron Parts's low price-to-book value ratio of 0.9* and low price-to-sales ratio of 0.15x, Jacobs believes the stock could be an interesting investment. However, she wants to review the disclosures found in the company's financial footnotes. In particular, Jacobs is concerned about Iron Parts's defined benefit pension plan. The following information for 2007 and 2008 is provided.
Iron Parts has adopted SFAS No. 158, Employers' Accounting for Defined Benefit Pensions and Other Postretirement Plans.
Jacobs wants to fully understand the impact of changing pension assumptions on Iron Parts's balance sheet and income statement. In addition, she would like to compute Iron Parts's economic pension expense.
As of December 31, 2008, the funded status of Iron Parts's pension plan was:
A. $183 million overfunded.
B. $175 million underfunded.
C. $240 million underfunded.
Answer: C
Explanation:
Explanation/Reference:
Explanation:
Funded status equals fair value of plan assets minus PBO (395 - 635 = -240). (Study Session 6, LOS
22.c,f)
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