When a funded pension plan is adopted, its total cost to the employer for the first year may be

When a funded pension plan is adopted, its total cost to the employer for the first year may be apportioned to past-service cost and current-service cost.

(a) Distinguish between these two costs.

(b) How should these costs be charged to accounting periods?

(c) What should be the balance sheet treatment of these costs if the em- ployer must (by contract) accumulate in a trusted fund enough equity to guarantee employees their benefits upon retirement?

(AICPA adapted)

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