ABC Corporation's Defined Benefit Plan Liability Calculation

ABC Corporation sponsors a defined benefit pension plan for its employees. The plan guarantees employees a retirement benefit based on their years of service and final average salary. At the end of the fiscal year, ABC reported a projected benefit obligation (PBO) of $1,200,000 and plan assets of $800,000. The company contributed $200,000 to the pension plan during the year.

As part of its financial statements, ABC must recognize the net pension liability or asset on the balance sheet. How should ABC calculate and present its defined benefit pension plan on the balance sheet?