Effective January 1, 2010, 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, 2010. 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 2010 and 2011 is the same. How should the service cost for 2011 compare with 2010, and should the 2010 balance sheet report an accrued or a prepaid pension cost?

Service cost for 2011 compared to 2010 Pension cost reported on the 2010 balance sheet

a. Equal to Accrued

b. Equal to Prepaid

c. Greater than Accrued

d. Greater than Prepaid