PENCOMP AGs statement of financial position at December 31, 2021, is as follows.

PENCOMP AG Statement of Financial Position As of December 31, 2021 Assets Equity Plant and equipment 2,000 Share capital 2,000 Accumulated depreciation (240) Retained earnings 896 1,760 Total equity 2,896 Inventory 1,800 Liabilities Cash 438 Notes payable 1,000 Total current assets 2,238 Pension liability 102 Total assets 3,998 Total liabilities 1,102 Total equity and liabilities 3,998 Additional information concerning PENCOMPs defined benefit pension plan follows.

Defined benefit obligation at 12/31/21 820.5 Plan assets (fair value) at 12/31/21 718.5 Service cost for 2022 42.0 Discount (interest) rate 10% Actual return on plan assets in 2022 60.6 Contributions to pension fund in 2022 70.0 Benefits paid during 2022 40.0 Accumulated OCI (net loss due to changes in actuarial assumptions and deferred net losses on plan assets) at 12/31/21; included in retained earnings balance 92.0 Other information about PENCOMP is as follows.

Salary expense, all paid with cash during 2022 700.0 Sales, all for cash 3,000.0 Purchases, all for cash 2,000.0 Inventory at 12/31/2022 1,800.0 Property originally cost 2,000 and is depreciated on a straight-line basis over 25 years with no residual value.

Interest on the note payable is 10% annually and is paid in cash on 12/31 of each year.

Dividends declared and paid are 200 in 2022.

Accounting

Prepare an income statement for 2022 and a statement of financial position as of December 31, 2022. Also, prepare the pension expense journal entry for the year ended December 31, 2022. (Round to two decimal places.)

Analysis

Compute return on equity for PENCOMP for 2022 (assume average equity is equal to year-end equity). Do you think an argument can be made for including some or even all of the asset/liability gains and losses in the numerator of return on equity? Illustrate that calculation.

Principles

Explain a rationale for why the IASB has (so far) decided to exclude from the current-period income statement the effects of gains and losses due to changes in actuarial assumptions.