Chapter 17, Problem 17.8Q

To determine

Pension plan: This is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension. The earnings which are set aside during the employee tenure are accumulated and invested, are paid to employees as a replacement of wages, to meet the retirement needs.

Defined benefit pension plans: In such plans, employers pay annual fixed contributions to employees as retirement benefits. Employers promise to pay fixed retirement benefits, which are computed based on the service period of employee, annual compensation of the employee, and age.

Net pension cost: Pension cost is an expense to the employer paid as compensation after the completion of services performed by the employees.

To indicate: The components of net pension cost under s defined benefit pension plan