Exam 6: Pensions and Other Employee Future Benefits

Which statement best explains the meaning of "current service cost"?

A company has a defined benefit pension asset of $1,300,000 at the beginning of the year. The company contributes $4,000,000 to the pension during the year and records a pension expense of $6,200,000. The closing balance of the defined benefit pension plan at year-end is therefore a:

Phil 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 80 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. Required: Determine the current service cost for Phil Jackson's pension for the past year (the year just before he turned 45).

A company has a defined benefit pension asset of $1,050,000 at the beginning of the year. The company contributes $5,500,000 to the pension during the year and records a pension expense of $8,200,000. Required: Determine the value of the defined benefit pension liability at year-end.

Sally is currently 30 years old and is planning for her retirement. She would like to have an income of $55,000 per year during her retirement, which she anticipates will last for another 25 years. Assume that she receives the retirement income at the end of each of the 25 years. Required: Determine the amount of money Sally will need to have accumulated by the time she starts her retirement. Assume a discount rate of 4%.

A company's defined benefit pension plan incurs current service cost of $4,000,000. This pension plan's assets generated $2,500,000 of income, which exceeded expectations by $500,000. Pension obligations incurred interest cost of $1,500,000, which were $700,000 below expectations. During the year, the company increased benefits in the pension plan and incurred $800,000 for past service cost.

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

What is true of the interest cost component of the pension expense?

Which statement is correct?

Which statement is correct?

What are the two components of OCI related to pensions? What is the conceptual reason for recognizing these two components through OCI rather than net income?

In a recent flood some company records have been partially destroyed and it is your job to help reconstruct the missing data. For one of the company employees, Piper Jones, you have managed to gather some information regarding her pension. She currently earns $78,000 per year and expects to be paid through the company's defined benefits pension plan 7% of her final salary for each year of service. Given the state of the company, salaries are not expected to increase. You know that the pension payments should continue until her death, which actuaries expect to be when she turns 90 years old. You also know that the value of the future annuities at date of retirement should be $71,870 fulfill this commitment. Piper has just turn 55, however, you do not know her planned retirement age. Required: a. Determine Piper Jones planned retirement age assuming the company uses 5% interest rate for its pension plans. b. Determine the current service cost for Piper Jones' pension for the past year (the year just before she turned 45).

Which of the following component does not relate to the assets/liabilities held in the pension trust for a defined benefit plan?

What are actuarial losses or gains in a defined benefit plan?

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 each retiree receives $10,000 in the future; the plan does not guarantee the investment returns to the employees."

Which of the following component refers to the services provided by the employees in the current period in a defined benefit plan?

Which statement is correct?

KitKat Singh is currently 30 years old and he plans to retire early, in 25 years' time. He would like to have an income of $50,000 per year during his retirement, which he anticipates will last for another 30 years. Assume that he receives the retirement income at the end of each of the 30 years. Required: Determine the amount of money he will need to have accumulated by the time he starts his retirement. Assume a discount rate of 5%.

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

Gander Products has a defined contribution pension plan for its employees. The plan requires the company to contribute 6% of these employees' salaries to the pension. In 2019, total salary for employees covered by the pension plan totalled $40 million, of which 75% is attributable to employees involved in manufacturing while the remaining 25% of salaries relate to administrative staff. The company contributed $500,000 to the pension during the year. Required: Provide the summary journal entry for Gander's pension plan for 2019.