In 2015, the Rachel Company initiated a defined benefit pension plan. It recorded $240,000 as pension expense and paid $280,000 to a funding agency. As a result, Rachel will report

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The difference between the pension expense ($240,000) and the amount paid to the funding agency ($280,000) is $40,000. This excess payment creates a prepaid pension cost, as the company has paid more into the plan than the expense recognized for the period.

In 2015, the Rachel Company Initiated a Defined Benefit Pension