XYZ sponsors a defined contribution plan for its employees.On January 1, Year 1, the company paid $120,000 to the plan's trustee.The trustee called for annual payments of $90,000 to be made annually into the plan.Which of the following best describes the effects of this plan on XYZ's Year 1 financial statements?

Question

Quizplus · Accepted Answer

XYZ would record a pension expense of $90,000, which is the required annual payment. The excess payment of $30,000 ($120,000 paid - $90,000 required) would be recorded as a current asset, representing a prepayment for future contributions.

XYZ Sponsors a Defined Contribution Plan for Its Employees