Question 1

Which statement explains the risk involved in "defined benefit plans"?

Accepted Answer

A) The plan places investment risk on employees since the future benefits are pre-specified. 
B) The plan sponsor never needs to increase its contributions to the pension trust. 
C) The plan may require the employee to pay $200 per month for each year of service. 
D) The plan specifies the eventual outflows from the pension trust to future retirees. 
A) The plan places investment risk on employees since the future benefits are pre-specified. 
B) The plan sponsor never needs to increase its contributions to the pension trust. 
C) The plan may require the employee to pay $200 per month for each year of service. 
D) The plan specifies the eventual outflows from the pension trust to future retirees.

Question 2

A company reported $430,000 of pension expense in its income statement.The balance sheet showed that the pension asset increased by $29,000 over the year.
Requirement:
How much cash was paid to the pension trustee during the period?

Accepted Answer

None

Question 3

Heidi Jackson has a twin brother,Phil,who works for the Government of Alberta.Phil is covered by a defined benefit pension plan.Phil just turned 45 years old,and expects to retire at age 65.At that time,the pension plan will pay Phil annual pension payments equal to 2% of his final year's salary for each year of services rendered.The pension payments will continue until Phil's death,which actuaries expect to be when he turns 95 years old.For the current year,Phil will earn $55,000,and this rate is expected to increase by 5% per year.Assume that the Alberta Government uses a 10% interest rate for its pension obligations.
Requirement:
Determine the current service cost for Phil Jackson's pension for the past year (the year just before he turned 45).

Accepted Answer

Using BAII Plus financial calc

Question 4

What is an actuarial loss?

Accepted Answer

A) An unfavourable difference between actual and expected amounts for pension assets. 
B) A favourable difference between actual and expected amounts for pension assets. 
C) An unfavourable difference between actual and expected amounts for pension contributions. 
D) A favourable difference between actual and expected amounts for pension obligations. 
A) An unfavourable difference between actual and expected amounts for pension assets. 
B) A favourable difference between actual and expected amounts for pension assets. 
C) An unfavourable difference between actual and expected amounts for pension contributions. 
D) A favourable difference between actual and expected amounts for pension obligations.

Question 5

Discuss why accounting for "defined benefit plans" is so complex and the types of estimates required.

Accepted Answer

In these plans,the employer guarantees t

Question 6

Cup of Joe Corporation provides its employees with a defined benefit pension plan.As of January 1,2011,the following balances exist:
 $\begin{array}{ll}
\text { Accrued benefit obligation }&\$7,500,000\\
\text { Plan assets (at market value) } & 6,000,000 \\
\text { Unamortized past service cost from plan initiation } & 760,000 \\
\text { Unrecognized net loss from actuarial gains and losses } & 720,000 \\
\text { Interest rate on obligations } & 10 \%
\end{array}$ For the year ended December 31,2011,the current service cost,as determined by an appropriate actuarial cost method,was $440,000.A change in actuarial assumptions created a loss of $12,000 in 2011.The expected return on plan assets was $360,000.
However,the actual return is $341,000.The expected period of full eligibility at January 1,2011 (i.e.,the vesting period)is 10 years,while the expected average remaining service life is 15 years.Cup of Joe paid $996,000 to the pension trustee in December 2010.The company recognizes only the minimum amount of corridor amortization.
Requirement:
Calculate the pension expense for 2011 and determine the carry forward amount for unrecognized actuarial gains or losses at the end of 20ll.

Accepted Answer

11eaca7f_c

Question 7

What amount is outside of the corridor limit for fiscal 2014? $$\begin{array} { | l | r | r | } 
\hline \text { Balance at Dec } 31 & \text { Fiscal 2013 } & \text { Fiscal 2014 } \
\hline \text { Pension assets } & 5,000,000 & 3,000,000 \
\hline \text { Pension obligation } & 3,200,000 & 3,500,000 \
\hline \text { Unamortized actuarial gains } & 210,000 & 300,000 \
\hline
\end{array}$$

Accepted Answer

A) $50,000 
B) $290,000 
C) $300,000 
D) $350,000 
A) $50,000 
B) $290,000 
C) $300,000 
D) $350,000

Question 8

Tener Company sponsors a defined contribution pension plan for its employees.The plan specifies that the company will contribute $2 for every dollar that an employee contributes to the plan.Employees are eligible to contribute up to 7% of their salary to the pension plan.During 2012,employees covered by the pension plan earned salaries totalling $42 million.Employee contributions to the pension totalled $2.1 million.Tener contributed $3 million to the plan during the year.
Requirement:
Provide the summary journal entry for Tener's pension plan for 2012.

Accepted Answer

None

Question 9

If a pension plan is non-contributory,who makes the contributions?

Accepted Answer

A) Both the employer and employee. 
B) Only the employee. 
C) Only the employer. 
D) No one. 
A) Both the employer and employee. 
B) Only the employee. 
C) Only the employer. 
D) No one.

Question 10

At the beginning of the current year,a pension has assets of $84,500,000 and accrued benefit obligation of $87,500,000.At this time,unamortized actuarial losses were $6,750,000 on plan assets and $2,800,000 on plan obligations.The expected average remaining service lives (EARSL)of current employees is 10 years.
Requirement:
Compute the minimum corridor amortization.

Accepted Answer

None

Question 11

Which statement about "defined contribution plans" is correct?

Accepted Answer

A) Pension expense equals the contributions made based on the plan formula. 
B) Pension expense equals the present value of the future benefits to be paid to the retiree. 
C) Pension cost cannot be capitalized to the cost of inventory. 
D) Pension cost may not be capitalized to the construction cost of property,plant and equipment. 
A) Pension expense equals the contributions made based on the plan formula. 
B) Pension expense equals the present value of the future benefits to be paid to the retiree. 
C) Pension cost cannot be capitalized to the cost of inventory. 
D) Pension cost may not be capitalized to the construction cost of property,plant and equipment.

Question 12

Wags Inc Company sponsors a defined contribution pension plan for its employees.The plan specifies that the company will match the amount each employee contributes to the plan.Employees are eligible to contribute up to 4% of their salary to the pension plan.During 2012,employees covered by the pension plan earned salaries totalling $30 million.Employee contributions to the pension totalled $3 million.Wags Inc contributed $2 million to the plan during the year.
Requirement:
Provide the summary journal entry for Wags Inc's pension plan for 2012.

Accepted Answer

None

Question 13

Which statement explains the risk involved in "defined contribution plans"?

Accepted Answer

A) Poor returns on the pension investments reduce the benefits for future retirees. 
B) High returns on the pension investments increase the benefit payments for the employer. 
C) The plan specifies the fixed benefits that future retirees will receive. 
D) The plan provides benefits to future retirees depending on their years of service. 
A) Poor returns on the pension investments reduce the benefits for future retirees. 
B) High returns on the pension investments increase the benefit payments for the employer. 
C) The plan specifies the fixed benefits that future retirees will receive. 
D) The plan provides benefits to future retirees depending on their years of service.

Question 14

A company has a defined benefit pension asset of $750,000 at the beginning of the year.The company contributes $2,500,000 to the pension during the year and records a pension expense of $2,200,000.
Requirement:
Determine the value of the defined benefit pension liability at year-end.

Accepted Answer

The summary journal entry recorded for t

Question 15

Which statement is correct?

Accepted Answer

A) The defined benefit liability or asset must be separately identified on the income statement. 
B) The components of pension expense must be disclosed in the notes to the statements. 
C) The defined benefit liability or asset must be separately identified on the balance sheet. 
D) Pension asset/liability amounts can be offset if a company has more than one benefit plan. 
A) The defined benefit liability or asset must be separately identified on the income statement. 
B) The components of pension expense must be disclosed in the notes to the statements. 
C) The defined benefit liability or asset must be separately identified on the balance sheet. 
D) Pension asset/liability amounts can be offset if a company has more than one benefit plan.

Question 16

A company's defined benefit pension plan incurs current service cost of $8,000,000.Expected income on the pension plan's assets amounted to $7,800,000,while actual income was $9,900,000.The interest on the pension obligation was $9,000,000,which matched the actuarial estimates.The pension plan has no past service costs,and unamortized actuarial gains or losses at the beginning of the year are within the corridor limit.
Requirement:
Compute the amount of pension expense for the year.

Accepted Answer

Note that it is the expected i

Question 17

Which statement is not correct?

Accepted Answer

A) If an enterprise has a pension plan with a defined benefit liability and another plan with a defined benefit asset,the two amounts would be shown net in the balance sheet. 
B) If an enterprise has a pension plan with a defined benefit liability and another plan with a defined benefit asset,the two amounts would be shown separately in the balance sheet. 
C) Two plans that both have net liability positions can be combined. 
D) Two plans that both have net asset positions can be combined. 
A) If an enterprise has a pension plan with a defined benefit liability and another plan with a defined benefit asset,the two amounts would be shown net in the balance sheet. 
B) If an enterprise has a pension plan with a defined benefit liability and another plan with a defined benefit asset,the two amounts would be shown separately in the balance sheet. 
C) Two plans that both have net liability positions can be combined. 
D) Two plans that both have net asset positions can be combined.

Question 18

Changing Assumptions Ltd.has the following details related to its defined benefit pension plan as at December 31,2013: Pension fund assets of $1,900,000 and Actuarial obligation of $1,806,317.
The actuarial obligation represents the present value of a single benefit payment of $3,200,000 that is due on December 31,2019,discounted at an interest rate of 10%; i.e.,$3,200,000 / 1.106 = $1,806,317.
The pension has no unamortized experience gains or losses,and no past service costs at the end of 2013.Funding during 2014 was $55,000.The actual value of pension fund assets at the end of 2014 was $2,171,000.As a result of the current services received from employees,the single payment due on December 31,2019 had increased from $3,200,000 to $3,380,000.
Required:
a.Compute the current service cost for 2014 and the amount of the accrued benefit obligation at December 31,2014.Perform this computation for interest rates of 8%,10%,and 12%.
b.Derive the pension expense for 2014 under various assumptions about the expected return and discount rate.Complete the following table:
   c.Briefly comment on the different amounts of pension expense in relation to the assumptions for expected return and discount rate.How does a change in the discount rate affect the accrued benefit obligation?

Accepted Answer

a.Current service cost and actuarial obl

Question 19

What amount will be presented on the balance sheet for fiscal 2014? $$\begin{array} { | l | r | r | } 
\hline & \text { Fiscal 2014 } & \text { Fiscal 2015 } \
\hline \text { Fair value of pension plan assets } & 50,000,000 & 45,000,000 \
\hline \text { Accrued pension obligation } & 60,000,000 & 42,000,000 \
\hline \text { Contributions } & 7,000,000 & 10,000,000 \
\hline \text { Benefits } & 8,000,000 & 8,000,000 \
\hline
\end{array}$$

Accepted Answer

A) $5,000,000 surplus 
B) $5,000,000 deficit 
C) $7,000,000 
D) $60,000,000 
A) $5,000,000 surplus 
B) $5,000,000 deficit 
C) $7,000,000 
D) $60,000,000

Question 20

What is the pension expense for the following plan? "The company must contribute $100/year for each of its 500 employees.The plan hopes to accumulate enough funds so that retirees receive $10,000 in the future; the plan does not guarantee the investment returns to the employees."

Accepted Answer

A) $100 
B) $10,000 
C) $50,000 
D) $5,000,000 
A) $100 
B) $10,000 
C) $50,000 
D) $5,000,000

Which statement explains the risk involved in "defined benefit plans"?

A company reported $430,000 of pension expense in its income statement.The balance sheet showed that the pension asset increased by $29,000 over the year. Requirement: How much cash was paid to the pension trustee during the period?

What is an actuarial loss?

Discuss why accounting for "defined benefit plans" is so complex and the types of estimates required.

What amount is outside of the corridor limit for fiscal 2014? Balance at Dec 31 Fiscal 2013 Fiscal 2014 Pension assets 5,000,000 3,000,000 Pension obligation 3,200,000 3,500,000 Unamortized actuarial gains 210,000 300,000

If a pension plan is non-contributory,who makes the contributions?

Which statement about "defined contribution plans" is correct?

Which statement explains the risk involved in "defined contribution plans"?

A company has a defined benefit pension asset of $750,000 at the beginning of the year.The company contributes $2,500,000 to the pension during the year and records a pension expense of $2,200,000. Requirement: Determine the value of the defined benefit pension liability at year-end.

Which statement is correct?

Which statement is not correct?

What amount will be presented on the balance sheet for fiscal 2014? Fiscal 2014 Fiscal 2015 Fair value of pension plan assets 50,000,000 45,000,000 Accrued pension obligation 60,000,000 42,000,000 Contributions 7,000,000 10,000,000 Benefits 8,000,000 8,000,000

What is the pension expense for the following plan? "The company must contribute $100/year for each of its 500 employees.The plan hopes to accumulate enough funds so that retirees receive $10,000 in the future; the plan does not guarantee the investment returns to the employees."

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Accounting for Leases

Statement of Cash Flows

Filters

Exam 17: Pensions and Other Employee Future Benefits

Which statement explains the risk involved in "defined benefit plans"?

A company reported $430,000 of pension expense in its income statement.The balance sheet showed that the pension asset increased by $29,000 over the year. Requirement: How much cash was paid to the pension trustee during the period?

What is an actuarial loss?

Discuss why accounting for "defined benefit plans" is so complex and the types of estimates required.

What amount is outside of the corridor limit for fiscal 2014? Balance at Dec 31 Fiscal 2013 Fiscal 2014 Pension assets 5,000,000 3,000,000 Pension obligation 3,200,000 3,500,000 Unamortized actuarial gains 210,000 300,000

If a pension plan is non-contributory,who makes the contributions?

Which statement about "defined contribution plans" is correct?

Which statement explains the risk involved in "defined contribution plans"?

A company has a defined benefit pension asset of $750,000 at the beginning of the year.The company contributes $2,500,000 to the pension during the year and records a pension expense of $2,200,000. Requirement: Determine the value of the defined benefit pension liability at year-end.

Which statement is correct?

Which statement is not correct?

What amount will be presented on the balance sheet for fiscal 2014? Fiscal 2014 Fiscal 2015 Fair value of pension plan assets 50,000,000 45,000,000 Accrued pension obligation 60,000,000 42,000,000 Contributions 7,000,000 10,000,000 Benefits 8,000,000 8,000,000

What is the pension expense for the following plan? "The company must contribute $100/year for each of its 500 employees.The plan hopes to accumulate enough funds so that retirees receive $10,000 in the future; the plan does not guarantee the investment returns to the employees."

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Accounting for Leases

Statement of Cash Flows

Filters