At the end of Year One, in connection with a defined pension benefit plan, Major Company has a deferred loss of $600,000 which arose from the difference in its expected and actual earnings on plan assets as well as a change in an actuarial assumption. On that date, the expected average remaining service life of the employees is assumed to be ten years. In addition, the projected benefit obligation is $5.6 million and the plan assets amount to $4.9 million. Which of the following statements is true in connection with this $600,000 deferred loss?

a.Pension expense for Year One is increased by $4,000.

b.Pension expense for Year Two is increased by $4,000.

c.Pension expense for Year One is increased by $11,000.

d.Pension expense for Year Two is increased by $11,000.

The Wilston Corporation has a large defined pension benefit plan for its employees. Currently, the projected benefit obligation is $44 million and plan assets amount to $37 million. The earnings on the plan assets are expected to be 7 percent per year over the next few years. In the current year, the actual earnings were 8 percent. Which of the following statements is not true?

a.In computing its pension expense for the current year, the 7 percent expected return should ultimately be used to reduce the expense rather than the 8 percent actual return.

b.In arriving at the plan asset balance at the end of the year, the 8 percent actual earnings should be included rather than the 7 percent expected return.

c.The difference between the 7 percent expected return and the 8 percent actual return increases a deferred gain and has no direct impact on the pension expense.

d.The 1 percent by which actual earnings were in excess of expected earnings serves to reduce pension expense for the current year.