Question

Employer-sponsored defined benefit pension plan - Interest Cost

In an employer-sponsored defined benefit pension plan, the interest cost included in the pension expense represents:
A) The effective discount rate times the unamortized balance of prior service costs.
B) The increase in the projected benefit obligation due to the passage of time.
C) The increase in the fair value of plan assets due to the passage of time.
D) The difference between the actual and expected returns on plan assets.

Answer 1

The interest cost included in an employer-sponsored defined benefit pension plan represents the increase in the projected benefit obligation due to the passage of time.

Step-by-step explanation:

In an employer-sponsored defined benefit pension plan, the interest cost included in the pension expense represents the increase in the projected benefit obligation due to the passage of time.