Post-Employment Benefits Assessment

Hard Employee Compensation Post-employment Benefits

Company Alpha provides a defined benefit pension plan for its employees, which guarantees a specific retirement benefit amount based on a formula that typically considers the employees' salary and years of service. As of the most recent financial reporting period, Company Alpha is undergoing an actuarial valuation of its pension obligations. The actuary has determined that the present value of future pension obligations is $10 million, and the fair value of the plan assets is $6 million.

In the notes to the financial statements, the management of Company Alpha has disclosed that the company expects to contribute an additional $500,000 to the pension plan next year. Considering these factors, which of the following statements about Company Alpha's post-employment benefits is true?

The pension plan is overfunded by $4 million.

The net pension obligation (liability) is $4 million.

The company needs to recognize a prepayment asset of $500,000 in its financial statements.

Hint

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% Correct96%