Question

The component of pension expense that results from amending a pension plan to give recognition to previous service of currently enrolled employees is the amortization of: Multiple Choice Amendment cost. Prior service cost. Transition cost. Retiree service cost.

Answer 1

Prior service cost

Step-by-step explanation:

Prior service cost is described as a cost with additional benefits. It is usually granted when a pension plan has been amended.

When prior service cost is amortized, the previous service of currently enrolled employees is recognized. This recognition is beneficial to the employee as the recognition of the previous service provides additional benefits to be included in the amended pension plan.

Answer 2

The correct option is prior service cost

Step-by-step explanation:

The component of pension expense that results from amending a pension plan to give recognition to previous service of currently enrolled employees is the amortization of PRIOR SERVICE COST.

Prior service cost is the cost associated with additional benefits that have been granted via an amendment to a pension plan. This cost applies to employee services rendered in prior periods.