Effective January 1, Year 1, Flood Co. established a defined benefit pension plan with no retroactive benefits. The first of the required equal annual contributions was paid on December 31, Year 1 . A 10% discount rate was used to calculate service cost, and a 10% rate of return was assumed for plan assets. All information on covered employees for Year 1 and Year 2 is the same. How should the service cost component of pension expense for Year 2 compare with Year , and should the Year 1 balance sheet report a pension asset or liability? Service Cost for Year 2 Compared with Year 1 Greater than Pension Amount Reported on the Year 1 Balance Sheet A. B. C. D. Equal to Equal to Greater than Liability Asset Liability Asset