The accounting for defined contribution pension plans is easy because each year:

Question

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Defined contribution pension plans are straightforward and easy to account for because the employer's only obligation is to make an annual contribution to the plan. Therefore, the employer records pension expense equal to the annual contribution made each year. The actual amount paid out to retirees is not a factor in the accounting for a defined contribution pension plan. The other options listed (B and D) pertain to the accounting for defined benefit pension plans, which are more complex and require actuarial calculations to determine the pension expense and liability.

The Accounting for Defined Contribution Pension Plans Is Easy Because