Question - Carson Company sponsors a single-employer defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation. Among the components that should be included in the net pension cost recognized for a period are service cost, interest cost, and actual return on plan assets.
Describe two accounting problems which could result from the nature of the defined benefit pension plan. Explain why you think these problems may arise.
Explain how Carson should determine the actual return on plan assets, service cost, and interest cost component of the net pension cost. Provide specific information to support your answer.