Question 1

Companies recognize the accumulated benefit obligation in their accounts and in their financial statements.

Accepted Answer

A) True 
 B)False

Question 2

Kessler, 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 for 2015 is $140,000 and the amortization of prior service cost is $240,000. The company's actual funding of the plan in 2015 amounted to $500,000. The expected return on plan assets and the settlement rate were both 8%.
Instructions
(a) Determine the pension expense to be reported in 2015.
(b) Prepare the journal entry to record pension expense and the employers' contribution to the pension plan in 2015.

Accepted Answer

The answer of Kessler, Inc. received the following information from...

Question 3

Gains and losses that relate to the computation of pension expense should be

Accepted Answer

A)  recorded currently as an adjustment to pension expense in the period incurred. 
B)  recorded currently and in the future by applying the corridor method which provides the amount to be amortized. 
C)  amortized over a 15-year period. 
D)  recorded only if a loss is determined. 
A)  recorded currently as an adjustment to pension expense in the period incurred. 
B)  recorded currently and in the future by applying the corridor method which provides the amount to be amortized. 
C)  amortized over a 15-year period. 
D)  recorded only if a loss is determined.

Question 4

Presented below is information related to Jensen Inc. pension plan for 2015. $\begin{array}{lr}
\text { Service cost } & \$ 1,020,000 \
\text { Actual return on plan assets } & 210,000 \
\text { Interest on projected benefit obligation } & 390,000 \
\text { Amortization of net loss } & 90,000 \
\text { Amortization of prior service cost due to increase in benefits } & 165,000 \
\text { Expected return on plan assets } & 180,000
\end{array}$ What amount should be reported for pension expense in 2015?

Accepted Answer

A)  $1,485,000 
B)  $1,455,000 
C)  $1,635,000 
D)  $1,275,000 
A)  $1,485,000 
B)  $1,455,000 
C)  $1,635,000 
D)  $1,275,000

Question 5

Vested benefits

Accepted Answer

A)  usually require a certain minimum number of years of service. 
B)  are those that the employee is entitled to receive even if fired. 
C)  are not contingent upon additional service under the plan. 
D)  are defined by all of these answers. 
A)  usually require a certain minimum number of years of service. 
B)  are those that the employee is entitled to receive even if fired. 
C)  are not contingent upon additional service under the plan. 
D)  are defined by all of these answers.

Question 6

Use the following information for questions 88 and 89.
The following information relates to Jackson, Inc.:  
-The amount reported as the liability for pensions on the December 31, 2014 balance sheet is

Accepted Answer

A)  $ -0-. 
B)  $30,000. 
C)  $260,000. 
D)  $230,000. 
A)  $ -0-. 
B)  $30,000. 
C)  $260,000. 
D)  $230,000.

Question 7

The fair value of pension plan assets is used to determine the corridor and to calculate the expected return on plan assets.

Accepted Answer

The answer of The fair value of pension plan assets...

Question 8

Use the following information for questions 77 and 78.
On January 1, 2015, Newlin Co. has the following balances:   The settlement rate is 10%. Other data related to the pension plan for 2015 are: $$\begin{array} { l r } 
\text { Service cost } & \$ 180,000 \
\text { Amortization of prior service costs due to increase in benefits } & 60,000 \
\text { Contributions } & 300,000 \
\text { Benefits paid } & 135,000 \
\text { Actual return on plan assets } & 237,000 \
\text { Amortization of net gain } & 18,000
\end{array}$$
-The fair value of plan assets at December 31, 2015 is

Accepted Answer

A)  $2,337,000. 
B)  $2,100,000. 
C)  $2,202,000. 
D)  $2,065,000. 
A)  $2,337,000. 
B)  $2,100,000. 
C)  $2,202,000. 
D)  $2,065,000.

Question 9

The unexpected gains and losses from changes in the projected benefit obligation are called asset gains and losses.

Accepted Answer

A) True 
 B)False

Question 10

The following facts relate to the Gamble Co. postretirement benefits plan for 2015: $$\begin{array} { l r } 
\text { Service cost } & \$ 136,000 \
\text { Discount rate } & 10 \% \
\text { EPBO, January 1, 2015 } & \$ 1,095,000 \
\text { APBO, January 1, 2015 } & \$ 900,000 \
\text { Actual return on plan assets in 2015 } & \$ 31,500 \
\text { Expected return on plan assets in 2015 } & \$ 24,000
\end{array}$$ The amount of postretirement expense for 2015 is

Accepted Answer

A)  $194,500. 
B)  $202,000. 
C)  $221,500. 
D)  $226,000. 
A)  $194,500. 
B)  $202,000. 
C)  $221,500. 
D)  $226,000.

Question 11

Kraft, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2015. $$\begin{array} { l r } 
\text { Service cost } & 230,000 \
\text { Contributions to the plan } & 220,000 \
\text { Actual return on plan assets } & 180,000 \
\text { Projected benefit obligation (beginning of year) } & 2,400,000 \
\text { Fair value of plan assets (beginning of year) } & 1,600,000
\end{array}$$ The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2015 is

Accepted Answer

A)  $230,000. 
B)  $290,000. 
C)  $310,000. 
D)  $470,000. 
A)  $230,000. 
B)  $290,000. 
C)  $310,000. 
D)  $470,000.

Question 12

Use the following information for questions 86 and 87.
Foster Corporation received the following report from its actuary at the end of the year:  
-The amount reported as the pension liability at December 31, 2015 is

Accepted Answer

A)  $2,200,000 
B)  $1,480,000 
C)  $720,000 
D)  $760,000 
A)  $2,200,000 
B)  $1,480,000 
C)  $720,000 
D)  $760,000

Question 13

Prior service cost is recognized on the balance sheet under both U.S. GAAP and IFRS.

Accepted Answer

A) True 
 B)False

Question 14

Midland Company follows U.S. GAAP for its external financial reporting whereas Bailey Company follows IFRS for its external financial reporting. Both companies have defined-benefit pension plans. At December 31, 2015, prior to any adjusting entries, Midland Company's actuarial loss subject to amortization/recognition amounted to $55,000 and Bailey Company's actuarial loss subject to amortization/recognition amounted to $76,000. The remaining services lives of employees at both firms is estimated to be 10 years. What is the maximum amount of loss that could be recognized by each company in its income statement for the year ended December 31, 2015?

Accepted Answer

The answer of Midland Company follows U.S. GAAP for its...

Question 15

Which of the following disclosures of postretirement benefits would not be required by professional pronouncements?

Accepted Answer

A)  Postretirement expense for the period 
B)  A schedule showing changes in postretirement benefits and plan assets during the year 
C)  The amount of the EPBO 
D)  The assumptions and rates used in computing the EPBO and APBO 
A)  Postretirement expense for the period 
B)  A schedule showing changes in postretirement benefits and plan assets during the year 
C)  The amount of the EPBO 
D)  The assumptions and rates used in computing the EPBO and APBO

Question 16

The following information is for the pension plan for the employees of Payne, Inc.   Payne estimates that the average remaining service life is 15 years. Payne's contribution was $520,000 in 2015 and benefits paid were $260,000.
Instructions
(a) Calculate the interest cost for 2015.
(b) Calculate the actual return on plan assets in 2015.
(c) Calculate the unexpected gain or loss in 2015.(d) Calculate the corridor for 2015 and the amortization of the net gain for 2015.

Accepted Answer

The answer of The following information is for the pension...

Question 17

A postretirement asset is computed as the excess of the

Accepted Answer

A)  expected postretirement benefit obligation over the fair value of plan assets. 
B)  accumulated postretirement benefit obligation over the fair value of plan assets. 
C)  fair value of plan assets over the accumulated postretirement benefit obligation. 
D)  accumulated postretirement benefit obligation over the fair value of plan assets, but not vice versa. 
A)  expected postretirement benefit obligation over the fair value of plan assets. 
B)  accumulated postretirement benefit obligation over the fair value of plan assets. 
C)  fair value of plan assets over the accumulated postretirement benefit obligation. 
D)  accumulated postretirement benefit obligation over the fair value of plan assets, but not vice versa.

Question 18

Benefits under a pension plan can include the retiree, the retiree's spouse, and other dependents.

Accepted Answer

A) True 
 B)False

Question 19

In determining the present value of the prospective benefits (often referred to as the projected benefit obligation), which of the following are considered by the actuary?

Accepted Answer

A)  Retirement and mortality rate. 
B)  Interest rates. 
C)  Benefit provisions of the plan. 
D)  All of these are considered. 
A)  Retirement and mortality rate. 
B)  Interest rates. 
C)  Benefit provisions of the plan. 
D)  All of these are considered.

Question 20

Prior service cost is amortized on a

Accepted Answer

A)  straight-line basis over the expected future years of service. 
B)  years-of-service method or on a straight-line basis over the average remaining service life of active employees. 
C)  straight-line basis over 15 years. 
D)  straight-line basis over the average remaining service life of active employees or 15 years, whichever is longer. 
A)  straight-line basis over the expected future years of service. 
B)  years-of-service method or on a straight-line basis over the average remaining service life of active employees. 
C)  straight-line basis over 15 years. 
D)  straight-line basis over the average remaining service life of active employees or 15 years, whichever is longer.

Companies recognize the accumulated benefit obligation in their accounts and in their financial statements.

Gains and losses that relate to the computation of pension expense should be

Vested benefits

Use the following information for questions 88 and 89. The following information relates to Jackson, Inc.: -The amount reported as the liability for pensions on the December 31, 2014 balance sheet is

The fair value of pension plan assets is used to determine the corridor and to calculate the expected return on plan assets.

The unexpected gains and losses from changes in the projected benefit obligation are called asset gains and losses.

Use the following information for questions 86 and 87. Foster Corporation received the following report from its actuary at the end of the year: -The amount reported as the pension liability at December 31, 2015 is

Prior service cost is recognized on the balance sheet under both U.S. GAAP and IFRS.

Which of the following disclosures of postretirement benefits would not be required by professional pronouncements?

A postretirement asset is computed as the excess of the

Benefits under a pension plan can include the retiree, the retiree's spouse, and other dependents.

In determining the present value of the prospective benefits (often referred to as the projected benefit obligation), which of the following are considered by the actuary?

Prior service cost is amortized on a

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

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Exam 20: Accounting for Pensions and Postretirement Benefits

Companies recognize the accumulated benefit obligation in their accounts and in their financial statements.

Gains and losses that relate to the computation of pension expense should be

Vested benefits

Use the following information for questions 88 and 89. The following information relates to Jackson, Inc.: -The amount reported as the liability for pensions on the December 31, 2014 balance sheet is

The fair value of pension plan assets is used to determine the corridor and to calculate the expected return on plan assets.

The unexpected gains and losses from changes in the projected benefit obligation are called asset gains and losses.

Use the following information for questions 86 and 87. Foster Corporation received the following report from its actuary at the end of the year: -The amount reported as the pension liability at December 31, 2015 is

Prior service cost is recognized on the balance sheet under both U.S. GAAP and IFRS.

Which of the following disclosures of postretirement benefits would not be required by professional pronouncements?

A postretirement asset is computed as the excess of the

Benefits under a pension plan can include the retiree, the retiree's spouse, and other dependents.

In determining the present value of the prospective benefits (often referred to as the projected benefit obligation), which of the following are considered by the actuary?

Prior service cost is amortized on a

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

Filters