Question: Read this statement and answer the question: If pension expense recognized in a period exceeds the current amount funded by the employer, then there is

Read this statement and answer the question:

If pension expense recognized in a period exceeds the current amount funded by the employer, then there is an excess pension liability generated for the year. If the total liability of the pension fund exceeds pension fund assets, it is shown as an underfunded pension plan and is considered a liability.

On the other hand, if the pension expense recognized is lower than the actual payment, then asset is recognized. If the total asset exceeds total liability, then the additional asset is recognized as an overfunded pension plan and shown as prepaid pension asset.

Why is prepaid?

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