Question

When preparing the journal entry with a plan amendment, if the pension liability exceeds the unrecognized prior service cost ________

Answer 1

Answer:

The excess amount is debited to Other Comprehensive Income account

Explanation:

When a firm realises that the pension liabilities is greater than the unrecognised prior service cost, it issues a plan amendment, which may contain increases in benefits that are based on services rendered by firm in prior periods.

If so, the excess cost is amortized over the future periods in which are expected to receive benefits.