Question

The pension plan was amended last year, creating a prior service cost of \( \$ 100 \) million. Service cost and interest cost for the year were \( \$ 30 \) million and \( \$ 14 \) million, respectivel

Answer 1

The question addresses a pension plan amendment involving a prior service cost, service cost, and interest cost, which are components of pension expense in business accounting. It involves regulations that penalize underfunded pension plans and efforts to provide employees with more information. The context includes broader strategies for preserving pension programs.

Step-by-step explanation:

The question pertains to pension accounting, specifically referring to a prior service cost that resulted from an amendment to a pension plan. This cost, along with the annual service cost and the interest cost, are components of pension expense that a company must recognize. Regulations require firms to adequately fund their pension plans, and when they do not, they can be penalized. Employees must also be given sufficient information about their pension accounts to make informed decisions. In a broader context, there are ongoing discussions about saving pension programs, which involve various proposals such as increasing the retirement age, modifying payroll taxes, and adjusting payouts based on the retiree's wealth.

Answer 2

The subject of this question is Business, and it is about the amendment of a pension plan and the creation of a prior service cost.

Step-by-step explanation:

The subject of this question is Business and the grade level is High School. The question is about the amendment of a pension plan and the creation of a prior service cost.

When a pension plan is amended, changes are made to the plan's terms and conditions. In this case, the amendment resulted in a prior service cost of $100 million. This cost represents the additional liability incurred due to the changes made.

The service cost and interest cost mentioned in the question are components of the overall pension cost. The service cost, which is $30 million, represents the present value of the pension benefits earned by employees during the year. The interest cost, which is $14 million, is the interest expense accrued on the projected benefit obligation of the pension plan.