What is the pension expense for the following plan after 10 years?
"The company must contribute $100/year for each of its 500 employees.The plan hopes to accumulate enough funds so that each retiree receives $10,000 in the future;the plan does not guarantee the investment returns to the employees."

Question

Quizplus · Accepted Answer

The pension expense is the amount that the company has to contribute towards the pension fund each year, in order to accumulate enough funds to pay for the future benefits.

In this case, the company has to contribute $100/year for each of its 500 employees, which gives a total annual contribution of $50,000.

Over 10 years, the total contribution made by the company would be:
$50,000 x 10 years = $500,000

Therefore, the pension expense for the plan after 10 years is $500,000, which makes option C the correct answer.

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