Differentiate between a defined contribution pension plan and defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans.
Differentiate between a defined contribution pension plan and defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1. Differentiate between a defined contribution pension plan and defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans.
2. What is meant by past service cost? When is past service cost recognized as pension expense?
3. How does an “asset gain or loss” develop in pension accounting?
4. At January 1, 2015, Uddin Company had plan assets of $250,000 and a defined benefit obligation of the same amount. During 2015, service cost was $27,500 ,the discount rate was 10%, actual return on plan assets was $25,000, contributions were $20,000 and benefits paid were $17,500. Prepare a pension worksheet for Uddin Company for 2015.
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