Question 1

When compensation is recognized under an equity-classified award of stock options, the expiration of stock options is treated as ________.

Accepted Answer

A)  a prior period adjustment 
B)  an adjustment to compensation expense 
C)  a reclassification of shareholders' equity 
D)  a change in accounting estimate 
A)  a prior period adjustment 
B)  an adjustment to compensation expense 
C)  a reclassification of shareholders' equity 
D)  a change in accounting estimate

Question 2

The increase in the projected benefit obligation from one additional year of service from employees is referred to as ________.

Accepted Answer

A)  employer contribution 
B)  service cost 
C)  expected return on plan assets 
D)  prior service cost 
A)  employer contribution 
B)  service cost 
C)  expected return on plan assets 
D)  prior service cost

Question 3

Which of the following is not a characteristic of a restricted stock plan?

Accepted Answer

A)  The employee cannot sell the awarded shares until the vesting period has expired. 
B)  A restricted stock plan has value as long as the underlying shares are selling above zero. 
C)  Restricted shares are not stock options. 
D)  The employee is taxed on the stock award when it is granted. 
A)  The employee cannot sell the awarded shares until the vesting period has expired. 
B)  A restricted stock plan has value as long as the underlying shares are selling above zero. 
C)  Restricted shares are not stock options. 
D)  The employee is taxed on the stock award when it is granted.

Question 4

On January 1, Year 1, Axis Corporation granted employees 48,000 stock options for 48,000 shares of $2 par value common stock. The exercise price on the date of issue was equal to the market price of $23. There is a two-year vesting period and the options expire in four years. Employees have the right to sell back the shares to the corporation within six months of exercise. The fair value of the options has been estimated to be $31 per option and the company does not expect any forfeitures of the options. What is the amount of compensation expense for Year 1?

Accepted Answer

A)  $744,000 
B)  $0 
C)  $1,488,000 
D)  $1,104,000 
A)  $744,000 
B)  $0 
C)  $1,488,000 
D)  $1,104,000

Question 5

Merciful Industries has a beginning PBO balance of $500,000 and a settlement rate of 7%. As a result of an amendment to the current union contract, there are prior service costs of $46,500. What is the journal entry to record amortization of the prior service costs for the second year, assuming that the company uses a 5-year amortization period?

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Pension Expense } & 3,255 & \
\hline \text { Projected Benefit Obligation } & & 3,255 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Pension Expense } & 35,000 & \
\hline \text { Other Comprehensive Income } & & 35,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Other Comprehensive Income-Prior Service Costs } & 9,300 & \
\hline \text { Projected Benefit Obligation } & & 9,300 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Pension Expense } & 9,300 & \
\hline \begin{array} { l } 
\text { Other Comprehensive Income-Prior Service } \
\text { Costs }
\end{array} & & \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | r | r | } 
\hline \text { Pension Expense } & 3,255 & \
\hline \text { Projected Benefit Obligation } & & 3,255 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Pension Expense } & 35,000 & \
\hline \text { Other Comprehensive Income } & & 35,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Other Comprehensive Income-Prior Service Costs } & 9,300 & \
\hline \text { Projected Benefit Obligation } & & 9,300 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Pension Expense } & 9,300 & \
\hline \begin{array} { l } 
\text { Other Comprehensive Income-Prior Service } \
\text { Costs }
\end{array} & & \
\hline
\end{array}$$

Question 6

The net pension liability is decreased by ________.

Accepted Answer

A)  amortization of prior service costs 
B)  service costs 
C)  expected return on plan assets 
D)  amortization of net gain in other comprehensive net income 
A)  amortization of prior service costs 
B)  service costs 
C)  expected return on plan assets 
D)  amortization of net gain in other comprehensive net income

Question 7

Apple Plumbing reports actual returns on plan assets of $140,000, while the expected return was $121,000. In addition, an employee wellness program has resulted in changes in actuarial assumptions that result in an increase in the PBO of $24,000. What is the journal entry to record the gain on plan assets?

Accepted Answer

A)  $\begin{array}{|l|l|r|}
\hline\text { Pension Plan Assets } & 19,000 \
\hline \text { OCI - Actuarial Gains/Losses } &&19,000\
\hline
\end{array}$ 
B)  $\begin{array}{|l|l|r|}
\hline \text { Pension Plan Assets } & 19,000 \
\hline \text { Retained Earnings } &&19,000\
\hline 
\end{array}$ 
C)  $\begin{array}{|l|r|r|}
\hline\text { Pension Plan Assets } & 19,000 \
\hline \text { OCI - Pension Plan Gains/Losses } && 19,000\
\hline
\end{array}$ 
D)  $\begin{array}{|l|l|r|}
\hline\text { OCI - Pension Plan Gains/Losses } & 19,000 \
\hline \text { Pension Plan Assets } &&19,000\
\hline
\end{array}$ 
A)  $\begin{array}{|l|l|r|}
\hline\text { Pension Plan Assets } & 19,000 \
\hline \text { OCI - Actuarial Gains/Losses } &&19,000\
\hline
\end{array}$ 
B)  $\begin{array}{|l|l|r|}
\hline \text { Pension Plan Assets } & 19,000 \
\hline \text { Retained Earnings } &&19,000\
\hline 
\end{array}$ 
C)  $\begin{array}{|l|r|r|}
\hline\text { Pension Plan Assets } & 19,000 \
\hline \text { OCI - Pension Plan Gains/Losses } && 19,000\
\hline
\end{array}$ 
D)  $\begin{array}{|l|l|r|}
\hline\text { OCI - Pension Plan Gains/Losses } & 19,000 \
\hline \text { Pension Plan Assets } &&19,000\
\hline
\end{array}$

Question 8

When a pension plan is amended to recognize previous service of currently employed employees, what component of pension expense is created?

Accepted Answer

A)  transition costs 
B)  amendment costs 
C)  past service costs 
D)  prior service costs 
A)  transition costs 
B)  amendment costs 
C)  past service costs 
D)  prior service costs

Question 9

An employee who is awarded stock appreciation rights must purchase the related shares.

Accepted Answer

A) True 
 B)False

Question 10

List and explain the terms that are required to account for the issuance of stock options.

Accepted Answer

1. Exercise price or strike price-the fi

Question 11

Premier Sports Inc has a beginning PBO balance of $628,000 and a beginning market-related value of plan assets of $560,000. The net actuarial gain at the beginning of the period is $87,500 and the average employee base has a remaining service life of 20 years. What is the required amortization of actuarial gains or losses for the current year?

Accepted Answer

A)  $1,235 
B)  $3,140 
C)  $4,375 
D)  $24,700 
A)  $1,235 
B)  $3,140 
C)  $4,375 
D)  $24,700

Question 12

An employee who receives an equity-classified award of stock options has the right to receive shares of stock.

Accepted Answer

A) True 
 B)False

Question 13

Mega Corporation sponsors a defined-benefit plan for its employees. The beginning balance of the unamortized net actuarial gain is $250,000. The plan's custodian reports that the beginning balance of the PBO is $1,450,000 and the beginning balance of the market-related value of the plan assets is $1,100,000. The average remaining service life of Mega's pension plan eligible employees is 10 years.

Compute the current year's amortization required by the corridor method and prepare the journal entry.

Accepted Answer

The corridor is 10% of the larger of the

Question 14

The fixed price paid by an employee to acquire a share of stock under an option plan is the ________.

Accepted Answer

A)  exercise price 
B)  market price 
C)  historical price 
D)  book price 
A)  exercise price 
B)  market price 
C)  historical price 
D)  book price

Question 15

When liability-classified stock options expire, additional paid-in capital is increased.

Accepted Answer

A) True 
 B)False

Question 16

List and explain the three methods used to measure a company's pension obligation to its employees.

Accepted Answer

1. Vested benefit obligation (VBO)-This

Question 17

For an equity-classified award of stock options, what journal entry is made at the date of grant?

Accepted Answer

A)  No journal entry is prepared. 
B)  
Compensation Expense
APIC-Stock Options 
C)  
Deferred Compensation
 Common Stock 
D)  
Compensation Expense
Deferred Compensation 
A)  No journal entry is prepared. 
B)  
Compensation Expense
APIC-Stock Options 
C)  
Deferred Compensation
 Common Stock 
D)  
Compensation Expense
Deferred Compensation

Question 18

Restricted stock plans are less dilutive than stock option plans.

Accepted Answer

A) True 
 B)False

Question 19

On January 1, Year 1, Davenport Corporation granted an employee 10,000 options to purchase 10,000 shares of Davenport's $10 par common stock at $30 per share. The options became exercisable on December 31, Year 3, after the employee completed three years of service. The option was exercised on February 1, Year 4. The market prices of Davenport's stock were as follows: January 1, Year 1, $40; December 31, Year 3, $60; and February 1, Year 4, $55. An options pricing model estimated the value of the options at $20 each on the grant date. For Year 1, Davenport should recognize compensation expense of ________. (Do not round intermediate calculations. Only round your final answer to the nearest dollar.)

Accepted Answer

A)  $0 
B)  $66,667 
C)  $100,000 
D)  $200,000 
A)  $0 
B)  $66,667 
C)  $100,000 
D)  $200,000

Question 20

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

Accepted Answer

A) True 
 B)False

When compensation is recognized under an equity-classified award of stock options, the expiration of stock options is treated as ________.

The increase in the projected benefit obligation from one additional year of service from employees is referred to as ________.

Which of the following is not a characteristic of a restricted stock plan?

The net pension liability is decreased by ________.

When a pension plan is amended to recognize previous service of currently employed employees, what component of pension expense is created?

An employee who is awarded stock appreciation rights must purchase the related shares.

List and explain the terms that are required to account for the issuance of stock options.

An employee who receives an equity-classified award of stock options has the right to receive shares of stock.

The fixed price paid by an employee to acquire a share of stock under an option plan is the ________.

When liability-classified stock options expire, additional paid-in capital is increased.

List and explain the three methods used to measure a company's pension obligation to its employees.

For an equity-classified award of stock options, what journal entry is made at the date of grant?

Restricted stock plans are less dilutive than stock option plans.

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

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

When compensation is recognized under an equity-classified award of stock options, the expiration of stock options is treated as ________.

The increase in the projected benefit obligation from one additional year of service from employees is referred to as ________.

Which of the following is not a characteristic of a restricted stock plan?

The net pension liability is decreased by ________.

When a pension plan is amended to recognize previous service of currently employed employees, what component of pension expense is created?

An employee who is awarded stock appreciation rights must purchase the related shares.

List and explain the terms that are required to account for the issuance of stock options.

An employee who receives an equity-classified award of stock options has the right to receive shares of stock.

The fixed price paid by an employee to acquire a share of stock under an option plan is the ________.

When liability-classified stock options expire, additional paid-in capital is increased.

List and explain the three methods used to measure a company's pension obligation to its employees.

For an equity-classified award of stock options, what journal entry is made at the date of grant?

Restricted stock plans are less dilutive than stock option plans.

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

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