Exam 20: Accounting for Pensions and Postretirement Benefits

Discuss the following ideas related to pension assets:(a) Market-related asset value.(b) Actual return on plan assets.(c) Expected return on plan assets.(d) Unexpected gains and losses on plan assets.

In a defined-contribution plan, a formula is used that

The actual return on plan assets

Which of the following is true of pension termination?

The following facts relate to the Patton Co. postretirement benefits plan for 2015: Service cost \ 180,000 Discount rate 9\% APBO, January 1, 2015 \ 1,500,000 EPBO, January 1, 2015 \ 2,000,000 Benefit payments to employees \ 115,000 The amount of postretirement expense for 2015 is

Interest cost included in pension expense recognized for a period by an employer sponsoring a defined-benefit pension plan represents the

The accounting staff of Elias Inc. has prepared the following pension worksheet. Unfortunately, several entries in the worksheet are not readable. The company has asked your assistance in completing the worksheet and completing the accounting tasks related to the pension plan for 2015. Instructions (a) Determine the missing amounts in the 2015 pension worksheet, indicating whether the amounts are debits or credits. (b) Prepare the journal entry to record 2015 pension expense for Elias Inc.

The main purpose of the Pension Benefit Guaranty Corporation is to

The following information is related to the pension plan of Long, Inc. for 2015. Actual return on plan assets \ 200,000 Amortization of net gain 82,500 Amortization of prior service cost due to increase in benefits 150,000 Expected return on plan assets 230,000 Interest on projected benefit obligation 362,500 Service cost 850,000 Pension expense for 2015 is

Alternative methods exist for the measurement of the pension obligation (liability). Which measure requires the use of future salaries in its computation?

Use the following information for questions 80 through 84. The following information relates to the pension plan for the employees of Turner Co.: Turner estimates that the average remaining service life is 16 years. Turner's contribution was $882,000 in 2015 and benefits paid were $658,000. -The amount of AOCI (net gain) amortized in 2015 is

One component of pension expense is actual return on plan assets. Plan assets include

Use the following information for questions 74 through 76. The following data are for the pension plan for the employees of Lockett Company. Lockett's contribution was $420,000 in 2015 and benefits paid were $375,000. Lockett estimates that the average remaining service life is 15 years. -Assume that the actual return on plan assets in 2015 was $265,000. The unexpected gain on plan assets in 2015 was

Which of the following statements is true about postretirement health care benefits?

Hubbard, Inc. received the following information from its pension plan trustee concerning the operation of the company's defined-benefit pension plan for the year ended December 31, 2015. The service cost component of pension expense for 2015 is $890,000 and the amortization of prior service cost due to an increase in benefits is $180,000. The settlement rate is 10% and the expected rate of return is 8%. What is the amount of pension expense for 2015?

Explain corridor amortization.

Which of the following statements about the recognition of a prior service cost related to a postretirement obligation is correct?

Tucker, Inc. on January 1, 2015 initiated a noncontributory, defined-benefit pension plan that grants benefits to its 100 employees for services rendered in years prior to the adoption of the pension plan. The total expected service-years of the 100 employees who are expected to receive benefits under the plan is 1,200. An actuarial consulting firm has indicated that the present value of the projected benefit obligation on January 1, 2015 was $5,520,000. On December 31, 2015 the following information was provided concerning the pension plan's operations for its first year. Employer's contribution at end of year \ 1,600,000 Service cost 600,000 Projected benefit obligation 6,561,600 Plan assets (at fair value) 1,600,000 Expected return on plan assets 9\% Settlement rate 8\% Instructions (a) Compute the pension expense recognized in 2015. Assume the prior service cost is amortized over the average remaining service life of the employees. (b) Prepare the journal entries to reflect accounting for the company's pension plan for the year ended December 31, 2015. (c) Indicate the amounts that are reported on the income statement and the balance sheet for 2015.

The following facts relate to the postretirement benefits plan of Keller, Inc. for 2015: Service cost \ 730,000 Discount rate 8\% APBO, January 1,2015 \ 4,000,000 EPBO, January 1, 2015 \ 4,800,000 Average remaining service to full eligibility 20 years Average remaining service to expected retirement 25 years The amount of postretirement expense for 2015 is

The International Accounting Standards Board has proposed changes to IFRS pension accounting including all of the following except