Question

If the actual return on plan assets is positive, then it is subtracted from the annual pension expense? a)true b)false

Answer 1

The actual return on plan assets, when positive, is added to components that lower the annual pension expense, contradicting the statement that it is subtracted.

Step-by-step explanation:

When dealing with the calculation of pension expense, the situation is the opposite of the statement provided. If the actual return on plan assets is positive, rather than being subtracted, it is actually added to the components that will reduce the pension expense. Pension expense is typically calculated as the sum of the service cost, interest on the projected benefit obligation, and the effect of any changes in actuarial assumptions, minus the return on plan assets, and any amortization of prior service costs.