If a Pension Plan Amendment Is Adopted and Retroactive Benefits

question 1

Multiple Choice

If a pension plan amendment is adopted and retroactive benefits are granted to employees, the amount of the prior service cost at the date of grant is accounted for

• A)as an intangible asset and liability that are recognized on the plan amendment date
• B)as a prior period adjustment for the total amount of the prior service cost that is reported on the statement of retained earnings
• C)as the total amount of the prior service cost that is recognized as an expense on the current period's income statement
• D)initially as an unamortized amount to be included in the computation of pension expense over future periods

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Definitions:

Actual Overhead Cost

The real expenses incurred for overhead, including costs associated with running the business that are not directly tied to a specific product or service.

Overhead Applied

The process of assigning a portion of fixed and variable overhead costs to individual units of production.

Underapplied

A situation where the allocated or applied costs are less than the actual costs incurred, often in reference to manufacturing overhead.

Overapplied Overhead

A condition where the overhead allocated to products or services is more than the actual overhead incurred.