XYZ Sponsors a Defined Contribution Plan for Its Employees

question 4

Multiple Choice

XYZ sponsors a defined contribution plan for its employees.On January 1,Year 1,the company paid $120,000 to the plan's trustee.The trustee called for annual payments of $90,000 to be made annually into the plan.Which of the following best describes the effects of this plan on XYZ's Year 1 financial statements?

• A) XYZ would record pension expense of $120,000 and a current asset of $30,000.
• B) XYZ would record pension expense of $90,000 and a current asset of $30,000.
• C) XYZ would record pension expense of $90,000 and a non-current asset of $30,000.
• D) XYZ would record pension expense of $120,000 and no balance sheet amounts.

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Definitions:

Capital Budgeting

The process of making capital expenditure decisions in business.

Internal Reports

Financial or operational reports generated for internal use by the management and not for external stakeholders.

Improperly Sequenced

Arranged in an incorrect order that does not follow logical or established progression.

Capital Budgeting

The process by which a business evaluates and plans for significant investments in projects, properties, or equipment.