In 2010, the Barbara Company initiated a defined benefit pension plan.It recorded $240, 000 as pension expense and paid $280, 000 to a funding agency.As a result, Barbara will report

A) pension assets of $280, 000 and pension liabilities of $240, 000
B) an accrued liability of $50, 000
C) service cost of $280, 000 and unfunded prior service cost of $40, 000
D) prepaid pension cost of $40, 000
E) none of these

Question

Gardy Sylvain · Accepted Answer

Final Answer : D, Explanation :  The difference between the pension expense ($240,000) and the amount paid to the funding agency ($280,000) is $40,000. This excess payment results in a prepaid pension cost, as the company has paid more into the pension fund than the expense recognized for the period.

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