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Stock Considerations Pension Plans

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3. (TCO 4) When stock is issued for consideration other than cash, what is the measurement objective?
4. (TCOs 3 and 4) Differentiate between a defined contribution pension plan and a defined benefit pension plan.

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The stock considerations for pension plans are examined.

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3. Stock may be issued in several forms. It may be issued for cash or for non cash assets.When the stock is issued for cash, the measurement is simple in the sense that amount of its par value is reported in the stock account and the amount in excess of par should be reported in the additional paid-in-capital. Occasionally the stock is issued for something other than cash. For example the company can issue stock in return for a land or building. In such type of transaction, it becomes difficult for the company to value the transaction. More so when the market value of elements of transactions are not known with certainty the task becomes even more difficult. As a general guideline, the transaction should be reported at the fair market value.The market value may be indicated by the value of the consideration given (stock), or the value of the ...

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