What is the proper treatment of pension expense when computing net cash from operating activities using the indirect method?
A) net income is increased by the excess of the expense over the cash used to fund the plan
B) net income is increased by the sum of the expense plus the cash used to fund the plan
C) net income is increased by pension expense
D) net income is decreased by the cash used to fund the plan

Question

Quizplus · Accepted Answer

When using the indirect method, net income is adjusted for non-cash expenses and changes in working capital. Pension expense is a non-cash expense, so net income is increased by the excess of the pension expense over the cash actually used to fund the pension plan.

What Is the Proper Treatment of Pension Expense When Computing