Question 1

In a noncontributory pension plan, employees must fund some or all pension benefits.

Accepted Answer

A) True 
 B)False  False

Question 2

Interest cost will ________.

Accepted Answer

A)  increase pension expense and reduce plan assets 
B)  increase the PBO and reduce plan assets 
C)  increase the PBO and increase pension expense 
D)  increase pension expense and reduce the return on plan assets 
A)  increase pension expense and reduce plan assets 
B)  increase the PBO and reduce plan assets 
C)  increase the PBO and increase pension expense 
D)  increase pension expense and reduce the return on plan assets C

Question 3

How is interest cost calculated for a defined benefit pension plan?

Accepted Answer

A)  Multiply the beginning balance PBO by the settlement rate. 
B)  Multiply the beginning balance ABO by the settlement rate. 
C)  Multiply the PBO by the expected return on the plan assets. 
D)  Multiply the ABO by the expected return on the plan assets. 
A)  Multiply the beginning balance PBO by the settlement rate. 
B)  Multiply the beginning balance ABO by the settlement rate. 
C)  Multiply the PBO by the expected return on the plan assets. 
D)  Multiply the ABO by the expected return on the plan assets. A

Question 4

On January 1, 2017, Cable Corporation issues 6,000 stock-appreciation rights to its key executives. The terms of the plan state that the holders of the rights will receive a cash payment equal to the difference between the market price of the stock on the date of exercise and the pre-established price of $9 per share. There is a three-year vesting period and the rights may be exercised on January 1, 2020. The rights expire on January 1, 2022. The closing market prices follow: December 31, 2017 $12 per share
December 31, 2018 $15 per share
December 31, 2019 $14 per share
What is the appropriate journal entry on December 31, 2018? (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

Accepted Answer

A)  $\begin{array}{|l|c|c|}
\hline\text { Compensation Expense } & 18,000 & \
\hline \text { Obligation under SAR Plan } & & 18,000\
\hline
\end{array}$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Obligation under SAR Plan } & 6,000 & \
\hline \text { Deferred Compensation } & & 6,000 \
\hline
\end{array}$$ 
C)  $\begin{array}{|l|r|r|}
\hline \text { Compensation Expense } & 72,000 \
\hline \text { Obligation under SAR Plan } && 72,000\
\hline
\end{array}$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Compensation Expense } & 2,000 & \
\hline \text { APIC-SAR } & & 2,000 \
\hline
\end{array}$$ 
A)  $\begin{array}{|l|c|c|}
\hline\text { Compensation Expense } & 18,000 & \
\hline \text { Obligation under SAR Plan } & & 18,000\
\hline
\end{array}$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Obligation under SAR Plan } & 6,000 & \
\hline \text { Deferred Compensation } & & 6,000 \
\hline
\end{array}$$ 
C)  $\begin{array}{|l|r|r|}
\hline \text { Compensation Expense } & 72,000 \
\hline \text { Obligation under SAR Plan } && 72,000\
\hline
\end{array}$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Compensation Expense } & 2,000 & \
\hline \text { APIC-SAR } & & 2,000 \
\hline
\end{array}$$

Question 5

When a company grants a liability-classified award, it does not make an entry at the grant date.

Accepted Answer

A) True 
 B)False

Question 6

Prior service cost is recognized as pension expense over a period of several years under U.S. GAAP.

Accepted Answer

A) True 
 B)False

Question 7

The first step in measuring compensation expense from granting employee stock options is to determine the fair value on the date of grant.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a component of annual pension expense?

Accepted Answer

A)  service cost 
B)  amortization of prior service costs 
C)  actual return on plan assets 
D)  interest on the projected benefit obligation 
A)  service cost 
B)  amortization of prior service costs 
C)  actual return on plan assets 
D)  interest on the projected benefit obligation

Question 9

If a pension plan is overfunded, it means that the ________.

Accepted Answer

A)  ABO exceeds plan assets 
B)  PBO is less than plan assets 
C)  ABO is less than plan assets 
D)  PBO exceeds plan assets 
A)  ABO exceeds plan assets 
B)  PBO is less than plan assets 
C)  ABO is less than plan assets 
D)  PBO exceeds plan assets

Question 10

Under the corridor approach, a company only amortizes the net accumulated unamortized actuarial gain or loss when the beginning accumulated unamortized balance of the net actuarial gain or loss exceeds the corridor.

Accepted Answer

A) True 
 B)False

Question 11

Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 90,000 options were granted for 90,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $3 based upon an option pricing model. At the end of the first year, it is expected that 100% of employees will exercise the options. By the end of Year 2, it is expected that only 80% of the options will be exercised. Assume that Schmidt chooses to adjust the fair value of the options for the estimated forfeitures.
What is the journal entry to recognize compensation expense and record the change in vesting probability in Year 2? (Do not round intermediate calculations. Only round your final answer to the nearest dollar.)

Accepted Answer

A)  
$\begin{array} { l l } 
\text { Deferred Compensation } & 54,000 \
\text { APIC - Stock Options } &&54,000
\end{array} $ 
B)  
$\begin{array}{llcc}
  \text { Compensation Expense  } &  90,000\
\text { Common Stock }&&90,000 \
\end{array}$ 
C)   
$\begin{array} { l l } 
\text { Compensation Expense } & 54,000 \
\text { APIC - Stock Options } &&54,000
\end{array} 54,000$ 
D)  
$\begin{array} { l l } 
\text { APIC - Stock Options } & 54,000 \
\text { Deferred Compensation } && 54,000
\end{array}$ 
A)  
$\begin{array} { l l } 
\text { Deferred Compensation } & 54,000 \
\text { APIC - Stock Options } &&54,000
\end{array} $ 
B)  
$\begin{array}{llcc}
  \text { Compensation Expense  } &  90,000\
\text { Common Stock }&&90,000 \
\end{array}$ 
C)   
$\begin{array} { l l } 
\text { Compensation Expense } & 54,000 \
\text { APIC - Stock Options } &&54,000
\end{array} 54,000$ 
D)  
$\begin{array} { l l } 
\text { APIC - Stock Options } & 54,000 \
\text { Deferred Compensation } && 54,000
\end{array}$

Question 12

Teague Corporation permits any of its employees to buy shares directly from the company through payroll deduction. There are no brokerage fees and shares can be purchased at a 10% discount. During July, employees purchased 20,000 $2 par shares of common stock at a time when the established market price was $30 per share. What is the journal entry to record issuance of these shares?

Accepted Answer

This appears to be a compensatory plan b

Question 13

On January 1, Year 1, Fields Corporation granted 300,000 stock options to certain executives. The vesting period is 3 years. The options are exercisable no sooner than December 31, Year 3 and expire on January 1, Year 7. Each option can be exercised to acquire one share of $10 par common stock for $15. An appropriate option-pricing model estimates the fair value of each option to be $13 on the date of grant. What is the fair value of the award?

Accepted Answer

A)  $3,900,000 
B)  $3,000,000 
C)  $900,000 
D)  $4,500,000 
A)  $3,900,000 
B)  $3,000,000 
C)  $900,000 
D)  $4,500,000

Question 14

On January 1, Year 1, Fields Corporation granted 200,000 stock options to certain executives. The vesting period is 3 years. The options are exercisable no sooner than December 31, Year 3 and expire on January 1, Year 7. Each option can be exercised to acquire one share of $10 par common stock for $15. An appropriate option-pricing model estimates the fair value of each option to be $11 on the date of grant. Fields chooses to adjust the fair value of the options for the estimated forfeitures. If unexpected turnover in Year 2 caused Fields to estimate that 12% of the options would be forfeited, what amount of compensation expense should Fields recognize in Year 2? (Round intermediate calculations and your final answer to the nearest dollar.)

Accepted Answer

A)  $0 
B)  $1,290,667 
C)  $733,333 
D)  $557,334 
A)  $0 
B)  $1,290,667 
C)  $733,333 
D)  $557,334

Question 15

Which of the following is not a method of measuring a company's pension benefit obligation to a company?

Accepted Answer

A)  projected benefit obligation 
B)  vested benefit obligation 
C)  future benefit obligation 
D)  accumulated benefit obligation 
A)  projected benefit obligation 
B)  vested benefit obligation 
C)  future benefit obligation 
D)  accumulated benefit obligation

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

On January 1, Year 1, Fields Corporation granted 500,000 stock options to certain executives. The options are exercisable no sooner than December 31, Year 3 and expire on January 1, Year 7. The vesting period is 3 years. Each option can be exercised to acquire one share of $10 par common stock for $15. An appropriate option-pricing model estimates the fair value of each option to be $12 on the date of grant. What amount should Fields recognize as compensation expense for Year 1?

Accepted Answer

A)  $0 
B)  $2,000,000 
C)  $750,000 
D)  $6,000,000 
A)  $0 
B)  $2,000,000 
C)  $750,000 
D)  $6,000,000

Question 18

Teague Corporation permits any of its employees to buy shares directly from the company through payroll deduction. There are no brokerage fees and shares can be purchased at a 10% discount. During July, employees purchased 40,000 shares at a time when the established market price was $26 per share. Teague will record an increase in cash of ________ associated with July purchases.

Accepted Answer

A)  $0 
B)  $104,000 
C)  $936,000 
D)  $1,040,000 
A)  $0 
B)  $104,000 
C)  $936,000 
D)  $1,040,000

Question 19

Which of the following is not an element of pension cost that must be disclosed?

Accepted Answer

A)  actual return on plan assets 
B)  service cost 
C)  interest cost 
D)  amortization of prior service cost 
A)  actual return on plan assets 
B)  service cost 
C)  interest cost 
D)  amortization of prior service cost

Question 20

If an unexpected forfeiture of options occurs under a stock option plan, the change in compensation is treated as ________.

Accepted Answer

A)  a change in estimate 
B)  an adjustment to additional paid in capital 
C)  an adjustment to deferred compensation 
D)  a change in other comprehensive income 
A)  a change in estimate 
B)  an adjustment to additional paid in capital 
C)  an adjustment to deferred compensation 
D)  a change in other comprehensive income

In a noncontributory pension plan, employees must fund some or all pension benefits.

Interest cost will ________.

How is interest cost calculated for a defined benefit pension plan?

When a company grants a liability-classified award, it does not make an entry at the grant date.

Prior service cost is recognized as pension expense over a period of several years under U.S. GAAP.

The first step in measuring compensation expense from granting employee stock options is to determine the fair value on the date of grant.

Which of the following is not a component of annual pension expense?

If a pension plan is overfunded, it means that the ________.

Under the corridor approach, a company only amortizes the net accumulated unamortized actuarial gain or loss when the beginning accumulated unamortized balance of the net actuarial gain or loss exceeds the corridor.

Which of the following is not a method of measuring a company's pension benefit obligation to a company?

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

Which of the following is not an element of pension cost that must be disclosed?

If an unexpected forfeiture of options occurs under a stock option plan, the change in compensation is treated as ________.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters

Exam 19: Accounting for Employee Compensation and Benefits

In a noncontributory pension plan, employees must fund some or all pension benefits.

Interest cost will ________.

How is interest cost calculated for a defined benefit pension plan?

When a company grants a liability-classified award, it does not make an entry at the grant date.

Prior service cost is recognized as pension expense over a period of several years under U.S. GAAP.

The first step in measuring compensation expense from granting employee stock options is to determine the fair value on the date of grant.

Which of the following is not a component of annual pension expense?

If a pension plan is overfunded, it means that the ________.

Under the corridor approach, a company only amortizes the net accumulated unamortized actuarial gain or loss when the beginning accumulated unamortized balance of the net actuarial gain or loss exceeds the corridor.

Which of the following is not a method of measuring a company's pension benefit obligation to a company?

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

Which of the following is not an element of pension cost that must be disclosed?

If an unexpected forfeiture of options occurs under a stock option plan, the change in compensation is treated as ________.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters