On January 1, 2017, WOW Amended Its Defined Benefit Pension

question 108

Multiple Choice

On January 1, 2017, WOW amended its defined benefit pension plan. The amount of prior service costs caused by this action was $720,000. WOW uses the service method for amortizing prior service costs. The following service years were provided by the company actuary: 2017, 20; 2018, 15;2019, 12;2020, 8; and 2021, 5. Twenty employees benefit from this amendment. In 2018, the amortization amount would be:

• A) $12,000.
• B) $180,000.
• C) $144,000.
• D) $300,000.

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Definitions:

Average Variable Cost

The total variable cost divided by the quantity of output produced.

Average Fixed Costs

The fixed costs of production divided by the quantity of output produced, illustrating how fixed costs per unit decrease as production increases.

Profit-Maximizing

The strategy or approach adopted by a company to increase its earnings to the highest possible level.

Perfectly Competitive

A market structure where there are many buyers and sellers, all of whom have full and symmetric information, and there are no barriers to entry or exit.