The McMurry Company offers employees a defined contribution pension plan.In 2010, McMurry contributed $75, 000 to the plan, which paid $95, 000 to retired employees.Which of the following statements is true?

A) McMurry will record an accrued liability of $20, 000.
B) McMurry will report pension expense of $75, 000.
C) McMurry will recognize prior service cost of $20, 000.
D) McMurry will recognize actuarial gains and losses on the plan over current and future periods.

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Tyneesheia Rogers · Accepted Answer

Final Answer : B, Explanation :  McMurry will report pension expense of $75,000, which represents the amount of contributions made in the current year. The fact that the plan paid out more than was contributed does not affect the expense recorded in the current year. Accrued liability is not relevant in a defined contribution plan, and prior service cost and actuarial gains and losses are not applicable because the plan design does not involve benefit formulas or projections.

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