Question 1

Assume that at the beginning of the current year, a company has a net gain-AOCI of $60,000,000. At the same time, assume the PBO and the plan assets are $300,000,000 and $450,000,000, respectively. The average remaining service period for the employees expected to receive benefits is 10 years. What is the amount of amortization to pension expense for the year?

Accepted Answer

A)  $6,000,000.
B)  $15,000,000.
C)  $1,500,000.
D)  $7,500,000.E) A) and B)
F) All of the above

Question 2

A statement of comprehensive income does not include:

Accepted Answer

A)  Net income.
B)  Losses from the return on assets exceeding expectations.
C)  Losses from changes in estimates regarding the PBO.
D)  Prior service cost.E) B) and D)
F) A) and B)

Question 3

When accounting for pensions, delayed recognition of gains and losses in earnings achieves:

Accepted Answer

A)  Income averaging.
B)  Expense averaging.
C)  Income optimization.
D)  Income smoothing.E) A) and B)
F) B) and C)

Question 4

The postretirement benefit obligation is the:

Accepted Answer

A)  Future value of the estimated benefits during retirement.
B)  Present value of the estimated benefits during retirement.
C)  Fair value of the estimated benefits during retirement.
D)  Actual value of estimated benefits during retirement.E) B) and D)
F) None of the above

Question 5

Castillo Company has a defined benefit pension plan. At the end of the reporting year, the following data were available: beginning PBO, $75,000; service cost, $18,000; interest cost, $5,000; benefits paid for the year, $9,000; ending PBO, $89,000; the expected return on plan assets, $10,000; and cash deposited with pension trustee, $17,000. There were no other pension-related costs. The journal entry to record the annual pension costs will include a credit to the PBO for:

Accepted Answer

A)  $13,000.
B)  $17,000.
C)  $18,000.
D)  $23,000.E) All of the above
F) C) and D)

Question 6

The PBO is increased by:

Accepted Answer

A)  An increase in the average life expectancy of employees.
B)  Amortization of prior service cost.
C)  An increase in the actuary's assumed discount rate.
D)  A return on plan assets that is lower than expected.E) B) and C)
F) A) and D)

Question 7

A company's defined benefit pension plan had a PBO of $265,000 on January 1, 2013. During 2013, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2013 was $80,000. Plan assets (fair value)  increased during the year by $45,000. The amount of the PBO at December 31, 2013, was:

Accepted Answer

A)  $225,000.
B)  $305,000.
C)  $331,500.
D)  None of the above is correct.E) A) and D)
F) A) and B)

Question 8

Prior service cost is recognized as pension expense over a period of several years.

Accepted Answer

A) True 
 B)False

Question 9

Pension benefits and postretirement health benefits typically are similar in their:

Accepted Answer

A)  Application of present value concepts.
B)  Vesting policies.
C)  Coverage for eligible dependents.
D)  Relationship between cost of coverage and length of service.E) C) and D)
F) All of the above

Question 10

Under IFRS, components of other comprehensive income:

Accepted Answer

A)  Can be reported as part of a single statement of comprehensive income.
B)  Are not permitted to be reported.
C)  Must be reported in a separate statement of comprehensive income.
D)  Can be reported as part of a statement of shareholders' equity.E) A) and D)
F) B) and C)

Question 11

If a pension plan is underfunded, the company has a net loss-OCI.

Accepted Answer

A) True 
 B)False

Question 12

A net pension asset is the excess of the projected benefit obligation over the plan assets.

Accepted Answer

A) True 
 B)False

Question 13

Discuss the key quantitative elements of accounting for a defined benefit pension plan.

Accepted Answer

The key elements of a defined benefit pe...

Question 14

The following is an incomplete pension spreadsheet for the current year for Sparky Corporation.  Required:
1) Complete the pension spreadsheet.
2) Prepare the journal entries to record pension expense and funding of plan assets for the year.
3) Prepare the journal entry/ies to record any gains or losses for the year.

Accepted Answer

The answer of The following is an incomplete pension spreadsheet...

Question 15

The APBO increases each year by the:

Accepted Answer

A)  Interest accrued on the APBO and the portion of the EPBO attributed to that year.
B)  Interest accrued on the EPBO and the portion of the EPBO attributed to that year.
C)  Interest accrued on the APBO and the portion of the APBO attributed to that year
D)  Interest accrued on the EPBO and the portion of the APBO attributed to that year.E) A) and B)
F) B) and C)

Question 16

The projected benefit obligation may be less reliable than the accumulated benefit obligation.

Accepted Answer

A) True 
 B)False

Question 17

Amortizing a net loss for pensions will:

Accepted Answer

A)  Increase retained earnings and increase accumulated other comprehensive income.
B)  Decrease retained earnings and decrease accumulated other comprehensive income.
C)  Increase retained earnings and decrease accumulated other comprehensive income.
D)  Decrease retained earnings and increase accumulated other comprehensive income.E) All of the above
F) B) and C)

Exam 17: Pensions and Other Postretirement Benefits

A statement of comprehensive income does not include:

Correct Answer
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Prior service cost is recognized as pension expense over a period of several years.

Correct Answer
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Discuss the key quantitative elements of accounting for a defined benefit pension plan.

Correct Answer
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The key elements of a defined benefit pe...
View Answer

Correct Answer
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Correct Answer
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A net pension asset is the excess of the projected benefit obligation over the plan assets.

Correct Answer
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The PBO is increased by:

Correct Answer
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Amortizing a net loss for pensions will:

Correct Answer
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The postretirement benefit obligation is the:

Correct Answer
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The projected benefit obligation may be less reliable than the accumulated benefit obligation.

Correct Answer
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When accounting for pensions, delayed recognition of gains and losses in earnings achieves:

Correct Answer
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The APBO increases each year by the:

Correct Answer
verified

If a pension plan is underfunded, the company has a net loss-OCI.

Correct Answer
verified

Correct Answer
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Under IFRS, components of other comprehensive income:

Correct Answer
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Pension benefits and postretirement health benefits typically are similar in their:

Correct Answer
verified

Exam 17: Pensions and Other Postretirement Benefits

A statement of comprehensive income does not include:

Correct AnswerverifiedShow Answer

Prior service cost is recognized as pension expense over a period of several years.

Correct AnswerverifiedShow Answer

Discuss the key quantitative elements of accounting for a defined benefit pension plan.

Correct AnswerverifiedThe key elements of a defined benefit pe...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A net pension asset is the excess of the projected benefit obligation over the plan assets.

Correct AnswerverifiedShow Answer

The PBO is increased by:

Correct AnswerverifiedShow Answer

Amortizing a net loss for pensions will:

Correct AnswerverifiedShow Answer

The postretirement benefit obligation is the:

Correct AnswerverifiedShow Answer

The projected benefit obligation may be less reliable than the accumulated benefit obligation.

Correct AnswerverifiedShow Answer

When accounting for pensions, delayed recognition of gains and losses in earnings achieves:

Correct AnswerverifiedShow Answer

The APBO increases each year by the:

Correct AnswerverifiedShow Answer

If a pension plan is underfunded, the company has a net loss-OCI.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under IFRS, components of other comprehensive income:

Correct AnswerverifiedShow Answer

Pension benefits and postretirement health benefits typically are similar in their:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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The key elements of a defined benefit pe...
View Answer

Correct Answer
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