If the Projected Benefit Obligation of a Defined Benefit Pension

question 2

Multiple Choice

If the projected benefit obligation of a defined benefit pension plan exceeds the fair value of the pension plan assets, the employer must report

• A) The difference as a liability in the balance sheet and a corresponding adjustment to the amount of pension expense reported in earnings.
• B) The difference as a liability in the balance sheet and a corresponding adjustment to other comprehensive income, net of deferred income taxes.
• C) The difference as an asset in the balance sheet and a corresponding adjustment to the amount of pension expense reported in earnings.
• D) The difference as an asset in the balance sheet and a corresponding adjustment to other comprehensive income, net of deferred income taxes.

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Definitions:

Income Effect

The change in an individual's or economy's purchasing power due to a change in income, affecting the quantity of goods and services bought.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a resource.

Dual Labor Market Theory

An economic theory that suggests the labor market is divided into two segments: the primary market, with secure, well-paid jobs, and the secondary market, characterized by low pay, job insecurity, and little room for advancement.

Backward-Bending

Refers to the backward-bending supply curve of labor, indicating that at some point, higher wages lead to a decrease in the labor supply.