Question

The component of periodic pension expense that represents the present value of the increase in an employer's pension obligation to employees because of their services rendered during the current period is the:

A) Current cost.
B) Service cost.
C) Accumulated benefit obligation (ABO).
D) Projected benefit obligation (PBO).

Answer 1

The component of periodic pension expense that represents the present value of the increase in an employer's pension obligation to employees because of their services rendered during the current period is the service cost.

Step-by-step explanation:

The component of periodic pension expense that represents the present value of the increase in an employer's pension obligation to employees because of their services rendered during the current period is the Service cost.

The service cost is the part of the pension expense that reflects the increase in the pension obligation due to the employees' service during the current period. It represents the present value of the future pension benefits that employees have earned for their services rendered.

For example, if an employee's salary increases, the service cost will increase because the present value of the future pension benefits will be higher.