Question 1

To compute the amortization on the cumulative unrecognized gains and losses for a pension plan,the corridor is computed as 10% of the

Accepted Answer

A) average of the beginning balances of the plan assets and the projected benefit obligation. 
B) higher of the beginning balances of the plan assets or the accumulated benefit obligation. 
C) higher of the beginning market-related value of the plan assets or the projected benefit obligation. 
D) lower of the beginning market-related value of the plan assets or the projected benefit obligation. 
A) average of the beginning balances of the plan assets and the projected benefit obligation. 
B) higher of the beginning balances of the plan assets or the accumulated benefit obligation. 
C) higher of the beginning market-related value of the plan assets or the projected benefit obligation. 
D) lower of the beginning market-related value of the plan assets or the projected benefit obligation.

Question 2

A higher discount rate assumption increases the projected benefit obligation and thereby increases the funded status.

Accepted Answer

A) True 
 B)False

Question 3

The Carrasco Company has provided you the following information pertaining to its defined benefit pension plan that was adopted on January 1, 2014:
• The service cost was $750,000 during 2014 and $1,125,000 during 2015.
• The contribution to the pension plan was $600,000 on December 31, 2014 and $1,200,000 on December 31, 2015.
• The actuarially determined discount rate and the expected return on plan assets are both 10%.
• The actual return on plan assets was 10.5%.
• Retirement benefits pertaining to years of service prior to 2014 were not granted to the employees.
-What is the pension expense for the year ended December 31,2015?

Accepted Answer

A) $1,140,000 
B) $1,065,000 
C) $1,200,000 
D) $1,137,000 
A) $1,140,000 
B) $1,065,000 
C) $1,200,000 
D) $1,137,000

Question 4

The Carrasco Company has provided you the following information pertaining to its defined benefit pension plan that was adopted on January 1, 2014:
• The service cost was $750,000 during 2014 and $1,125,000 during 2015.
• The contribution to the pension plan was $600,000 on December 31, 2014 and $1,200,000 on December 31, 2015.
• The actuarially determined discount rate and the expected return on plan assets are both 10%.
• The actual return on plan assets was 10.5%.
• Retirement benefits pertaining to years of service prior to 2014 were not granted to the employees.
-How much is the projected benefit obligation as of December 31,2015?

Accepted Answer

A) $1,875,000 
B) $1,200,000 
C) $1,950,000 
D) $2,062,500 
A) $1,875,000 
B) $1,200,000 
C) $1,950,000 
D) $2,062,500

Question 5

Higher marginal income tax rates create an incentive for companies to underfund their pension plans.

Accepted Answer

A) True 
 B)False

Question 6

Buffalo Company adopted a defined benefit pension plan as of January 1,2015.Buffalo has provided the following information pertaining to its pension plan:
• The projected benefit obligation as of January 1,2015 was determined to be $1,050,000.
• Service cost for 2015 is $225,000.
• Amortization of prior service cost will be $52,500 per year.
• The projected benefit obligation as of December 31,2015 was determined to be $1,380,000.
• The first contribution of $500,000 to the pension plan asset fund was made on December 31,2015.
• The settlement/discount rate is 10%.
Prepare the necessary journal entries for the year ended December 31,2015.

Accepted Answer

@#IMG-DLM& *$52,500 (prior ser

Question 7

There is a reduction in pension expense created by expected earnings of a defined benefit pension plan.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements does not properly describe a defined benefit pension plan?

Accepted Answer

A) Many assumptions are made in the determination of pension expense. 
B) The employee bears little risk with respect to estimating the amount of the annual contributions to the plan. 
C) The employer bears little risk with respect to estimating the amount of the annual contributions to the plan. 
D) A pension plan asset is not recorded on the employer's balance sheet. 
A) Many assumptions are made in the determination of pension expense. 
B) The employee bears little risk with respect to estimating the amount of the annual contributions to the plan. 
C) The employer bears little risk with respect to estimating the amount of the annual contributions to the plan. 
D) A pension plan asset is not recorded on the employer's balance sheet.

Question 9

The return on the pension fund impacts the employer's periodic pension expense for defined contribution pension plans.

Accepted Answer

A) True 
 B)False

Question 10

TKE Corporation established a defined benefit pension plan in 2012. TKE has provided the following information for the year ended December 31, 2014:
$\begin{array}{lr}
\text { Service cost } & \$ 90,000 \
\text { Interest cost } & \$ 120,000 \
\text { Actual return on plan assets } & \$ 70,000 \
\text { Expected return on plan assets } & \$ 80,000 \
\text { Amortization of prior service costs } & \$ 30,000
\end{array}$
-If the company contributes $130,000 cash to the pension plan trustee,which one of the following journal entries properly records the payment?

Accepted Answer

A)  DR Pension expense $~~~~~~~~$$~~~~~~~~$90,000
DR Pension asset$~~~~~~~~$$~~~~~~~~~~~~~$40,000
$~~~~$CR Cash $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$130,000 
B)  DR Pension expense $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$120,000
DR Pension asset $~~~~~~~~$$~~~~~~~~$$~~~~~~~~~~~~$10,000
$~~~~$CR Cash $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$130,000 
C)  DR Pension expense$\quad$130,000
CR Cash$\quad$130,000 
D)  DR Pension expense $~~~~~~~~$160,000
CR Cash $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~~~~~~~~$130,000 
CR Pension liability $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$30,000 
A)  DR Pension expense $~~~~~~~~$$~~~~~~~~$90,000
DR Pension asset$~~~~~~~~$$~~~~~~~~~~~~~$40,000
$~~~~$CR Cash $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$130,000 
B)  DR Pension expense $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$120,000
DR Pension asset $~~~~~~~~$$~~~~~~~~$$~~~~~~~~~~~~$10,000
$~~~~$CR Cash $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~$130,000 
C)  DR Pension expense$\quad$130,000
CR Cash$\quad$130,000 
D)  DR Pension expense $~~~~~~~~$160,000
CR Cash $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$$~~~~~~~~~~~~~~~$130,000 
CR Pension liability $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$30,000

Question 11

Which of the following is not a required disclosure pertaining to defined benefit pension plans?

Accepted Answer

A) A reconciliation of the beginning and ending projected benefit obligation balances. 
B) The retirement benefits that are expected to be paid in the next five years. 
C) The amount of pension expense and its components. 
D) The contributions to be made into the pension fund for each of the next ten years. 
A) A reconciliation of the beginning and ending projected benefit obligation balances. 
B) The retirement benefits that are expected to be paid in the next five years. 
C) The amount of pension expense and its components. 
D) The contributions to be made into the pension fund for each of the next ten years.

Question 12

The pension asset/liability reported within the balance sheet must reflect the funded status of the pension plan.

Accepted Answer

A) True 
 B)False

Question 13

Under IFRS,past service cost is recognized immediately as part of pension expense.

Accepted Answer

A) True 
 B)False

Question 14

The interest cost component of a defined benefit pension plan is computed as the

Accepted Answer

A) ending accrued pension liability times the discount rate. 
B) beginning accrued pension liability times the discount rate. 
C) beginning projected benefit obligation times the discount rate. 
D) beginning accumulated pension liability times the discount rate. 
A) ending accrued pension liability times the discount rate. 
B) beginning accrued pension liability times the discount rate. 
C) beginning projected benefit obligation times the discount rate. 
D) beginning accumulated pension liability times the discount rate.

Question 15

Service cost and interest cost cause reported pension expense to increase for defined benefit plans.

Accepted Answer

A) True 
 B)False

Question 16

The accumulated benefit obligation approximates the employer's pension liability if the pension plan were terminated and must be shown as a liability on the year-end balance sheet.

Accepted Answer

A) True 
 B)False

Question 17

The present value of the expected pension benefits that will ultimately be paid is the

Accepted Answer

A) accumulated benefit obligation. 
B) projected benefit obligation. 
C) minimum balance sheet liability. 
D) accrued pension liability. 
A) accumulated benefit obligation. 
B) projected benefit obligation. 
C) minimum balance sheet liability. 
D) accrued pension liability.

Question 18

Which of the following is not a criticism of pension accounting and reporting?

Accepted Answer

A) Net income immediately includes fund asset gains and losses,as well as projected benefit obligation actuarial gains and losses. 
B) Management has the discretion with respect to choosing the expected rate of return on plan assets. 
C) Some argue that operating income is misstated due to the deduction of pension expense. 
D) Some argue that service cost should be the only component of pension expense. 
A) Net income immediately includes fund asset gains and losses,as well as projected benefit obligation actuarial gains and losses. 
B) Management has the discretion with respect to choosing the expected rate of return on plan assets. 
C) Some argue that operating income is misstated due to the deduction of pension expense. 
D) Some argue that service cost should be the only component of pension expense.

Question 19

The parties involved in a defined benefit plan are the same as those in a defined contribution plan.

Accepted Answer

A) True 
 B)False

Question 20

the beginning of 2014, Moony, Inc. has a cumulative unrecognized loss of $50,000 in its pension plan. The estimated remaining service period of active employees is 12 years for both years.
$\begin{array}{llr}&2014&2015\
\text { Beginning plan asset value } & \$ 335,000 & \$ 350,000 \
\text { Beginning projected benefit obligation } & 325,000 & 385,000 \
\text { Current year gain or (loss) } & (37,500) & 25,000
\end{array}$
-At the beginning of 2014,Moony,Inc.has a cumulative unrecognized loss of $50,000 in its pension plan.The estimated remaining service period of active employees is 12 years for both years. $\begin{array}{llr}&2014&2015\
\text { Beginning plan asset value } & \$ 335,000 & \$ 350,000 \
\text { Beginning projected benefit obligation } & 325,000 & 385,000 \
\text { Current year gain or (loss) } & (37,500) & 25,000
\end{array}$
The corridor for amortization for 2015 is

Accepted Answer

A) $0. 
B) $25,000. 
C) $35,000. 
D) $38,500. 
A) $0. 
B) $25,000. 
C) $35,000. 
D) $38,500.

To compute the amortization on the cumulative unrecognized gains and losses for a pension plan,the corridor is computed as 10% of the

A higher discount rate assumption increases the projected benefit obligation and thereby increases the funded status.

Higher marginal income tax rates create an incentive for companies to underfund their pension plans.

There is a reduction in pension expense created by expected earnings of a defined benefit pension plan.

Which of the following statements does not properly describe a defined benefit pension plan?

The return on the pension fund impacts the employer's periodic pension expense for defined contribution pension plans.

Which of the following is not a required disclosure pertaining to defined benefit pension plans?

The pension asset/liability reported within the balance sheet must reflect the funded status of the pension plan.

Under IFRS,past service cost is recognized immediately as part of pension expense.

The interest cost component of a defined benefit pension plan is computed as the

Service cost and interest cost cause reported pension expense to increase for defined benefit plans.

The accumulated benefit obligation approximates the employer's pension liability if the pension plan were terminated and must be shown as a liability on the year-end balance sheet.

The present value of the expected pension benefits that will ultimately be paid is the

Which of the following is not a criticism of pension accounting and reporting?

The parties involved in a defined benefit plan are the same as those in a defined contribution plan.

The Economic and Institutional Setting for Financial Reporting

Accrual Accounting and Income Determination

Additional Topics in Income Determination

Structure of the Balance Sheet and Statement of Cash Flows

Essentials of Financial Statement Analysis

The Role of Financial Information in Valuation and Credit Risk Assessment

The Role of Financial Information in Contracting

Receivables

Inventories

Long-Lived Assets

Financial Instruments As Liabilities

Financial Reporting for Leases

Income Tax Reporting

Financial Reporting for Owners Equity

Intercorporate Equity Investments

Statement of Cash Flows

Filters

Exam 14: Pensions and Postretirement Benefits

To compute the amortization on the cumulative unrecognized gains and losses for a pension plan,the corridor is computed as 10% of the

A higher discount rate assumption increases the projected benefit obligation and thereby increases the funded status.

Higher marginal income tax rates create an incentive for companies to underfund their pension plans.

There is a reduction in pension expense created by expected earnings of a defined benefit pension plan.

Which of the following statements does not properly describe a defined benefit pension plan?

The return on the pension fund impacts the employer's periodic pension expense for defined contribution pension plans.

Which of the following is not a required disclosure pertaining to defined benefit pension plans?

The pension asset/liability reported within the balance sheet must reflect the funded status of the pension plan.

Under IFRS,past service cost is recognized immediately as part of pension expense.

The interest cost component of a defined benefit pension plan is computed as the

Service cost and interest cost cause reported pension expense to increase for defined benefit plans.

The accumulated benefit obligation approximates the employer's pension liability if the pension plan were terminated and must be shown as a liability on the year-end balance sheet.

The present value of the expected pension benefits that will ultimately be paid is the

Which of the following is not a criticism of pension accounting and reporting?

The parties involved in a defined benefit plan are the same as those in a defined contribution plan.

The Economic and Institutional Setting for Financial Reporting

Accrual Accounting and Income Determination

Additional Topics in Income Determination

Structure of the Balance Sheet and Statement of Cash Flows

Essentials of Financial Statement Analysis

The Role of Financial Information in Valuation and Credit Risk Assessment

The Role of Financial Information in Contracting

Receivables

Inventories

Long-Lived Assets

Financial Instruments As Liabilities

Financial Reporting for Leases

Income Tax Reporting

Financial Reporting for Owners Equity

Intercorporate Equity Investments

Statement of Cash Flows

Filters