Question

Interest cost included in pension expense recognized for a period by an employer sponsoring a defined-benefit pension plan represents the shortage between the expected and actual returns on plan assets. increase in the projected benefit obligation due to the passage of time. increase in the fair value of plan assets due to the passage of time. amortization of the discount on accumulated OCI (PSC).

Answer 1

Answer: Increase in the projected benefit obligation due to the passage of time.

Step-by-step explanation:

The interest cost is used to show how much the Projected Benefit Obligation (PBO) owed by the employer to the Defined Benefit pension plan has increased by in the period.

The interest cost increases based on the unpaid beginning PBO for the period that arises as the employment term of the employee increases and the interest rate is the discount rate that is used to discount the PBO.