When a company amends a pension plan, for accounting purposes, prior service costs should be

When a company amends a pension plan, for accounting purposes, prior service costs should be

a. treated as a prior period adjustment because no future periods are benefited.
b. amortized in accordance with procedures used for income tax purposes.
c. recorded in other comprehensive income (PSC).
d. reported as an expense in the period the plan is amended.


Answer: recorded in other comprehensive income (PSC)

When a company adopts a pension plan, prior service costs should be charged to

a. accumulated other comprehensive income (PSC).
b. operations of prior periods.
c. Other comprehensive income (PSC).
d. retained earnings.


Answer: Other comprehensive income (PSC)

Prior service cost is amortized on a

a. straight-line basis over the expected future years of service.
b. years-of-service method or on a straight-line basis over the average remaining service life of active employees.
c. straight-line basis over 15 years.
d. straight-line basis over the average remaining service life of active employees or 15 years, whichever is longer.


Answer: years-of-service method or on a straight-line basis over the average remaining service life of active employees