Question 1

Prior service cost is the increase in the projected benefit obligation created by pension plan amendments.

Accepted Answer

A) True 
 B)False

Question 2

The service cost of a defined benefit pension plan is the

Accepted Answer

A) annual fee charged by the plan administrator. 
B) change in the pension liability caused by plan amendments. 
C) change in the pension liability caused by one additional year of employee service. 
D) the retirement benefit earned by the employees for services provided to date. 
A) annual fee charged by the plan administrator. 
B) change in the pension liability caused by plan amendments. 
C) change in the pension liability caused by one additional year of employee service. 
D) the retirement benefit earned by the employees for services provided to date.

Question 3

If the beginning unrecognized gains are $30,000,the fair value of the plan assets is $200,000 at the beginning of 2014,and the average remaining service period of active employees is 10 years,the amortization of accumulated unrecognized gains for 2014 is

Accepted Answer

A) $0. 
B) $750. 
C) $1,000. 
D) $2,000. 
A) $0. 
B) $750. 
C) $1,000. 
D) $2,000.

Question 4

The interest cost component of a defined benefit pension plan is the portion of expense due to the passage of time.

Accepted Answer

A) True 
 B)False

Question 5

The income statement reporting for other postretirement benefits is based on the

Accepted Answer

A) cash basis of accounting. 
B) accrual basis of accounting. 
C) cash or accrual basis of accounting. 
D) regulations established by the tax code. 
A) cash basis of accounting. 
B) accrual basis of accounting. 
C) cash or accrual basis of accounting. 
D) regulations established by the tax code.

Question 6

A company instituted an IRS approved plan to contribute monies to a plan that would pay each employee a percentage of his or her highest year of salary for each year of service upon termination of services.This plan is a

Accepted Answer

A) defined benefit pension plan. 
B) defined contribution pension plan. 
C) government sponsored pension plan. 
D) postretirement benefit plan. 
A) defined benefit pension plan. 
B) defined contribution pension plan. 
C) government sponsored pension plan. 
D) postretirement benefit plan.

Question 7

The interest cost component of pension expense in year two is determined by multiplying the projected benefit obligation at the beginning of year two by the discount rate.

Accepted Answer

A) True 
 B)False

Question 8

Smith, Inc. has a pension plan with the following data available for 2014 and 2015:
$\begin{array}{lcc}&2014&2015\
\text { Service cost } & \$ 30,000 & \$ 34,000 \
\text { Interest cost } & \$ 18,000 & \$ 20,000 \
\text { Actual return on plan assets } & \$ 15,000 & \$ 21,600 \
\text { Beginning of year plan assets } & \$ 200,000 & \$ 240,000 \
\text { Settlement rate } & 8 \% & 8 \% \
\text { Expected return on plan assets } & 8 \% & 8 \%
\end{array}$
-The deferred gain or loss from the return on plan assets for 2015 is

Accepted Answer

A) $0. 
B) $2,400 deferred gain. 
C) $2,400 deferred loss. 
D) unknown from information provideD. $\begin{array}{lr}
\text { Expected return on plan assets } & \$ 19,200 \
\text { Actual return on plan assets } & \underline{21,600} \
\text { Deferred gain } & \$ 2,400
\end{array}$ 
A) $0. 
B) $2,400 deferred gain. 
C) $2,400 deferred loss. 
D) unknown from information provideD. $\begin{array}{lr}
\text { Expected return on plan assets } & \$ 19,200 \
\text { Actual return on plan assets } & \underline{21,600} \
\text { Deferred gain } & \$ 2,400
\end{array}$

Question 9

The amount of the cumulative gain or loss in excess of the corridor threshold is amortized to the pension expense over the average remaining service period of the employees.

Accepted Answer

A) True 
 B)False

Question 10

When accounting for funded postretirement benefit plans,actual return on plan assets is deducted from the postretirement benefit expense.

Accepted Answer

A) True 
 B)False

Question 11

Companies can influence the calculation of pension expense by choosing a higher or lower discount rate and/or by choosing a higher or lower expected rate of return on plan assets.

Accepted Answer

A) True 
 B)False

Question 12

A major difference between accounting for postretirement benefit plans and pension plans is that

Accepted Answer

A) postretirement benefit plans are not required to be funded. 
B) postretirement benefit plans do not create a liability to be shown on the plan sponsor's balance sheet. 
C) postretirement benefit plans do not deduct the return on plan assets when funded. 
D) there is no accumulated postretirement benefit obligation. 
A) postretirement benefit plans are not required to be funded. 
B) postretirement benefit plans do not create a liability to be shown on the plan sponsor's balance sheet. 
C) postretirement benefit plans do not deduct the return on plan assets when funded. 
D) there is no accumulated postretirement benefit obligation.

Question 13

The minimum pension liability that must be shown on the balance sheet of the plan sponsor is the excess of the projected benefit obligation over the plan assets at fair value.

Accepted Answer

A) True 
 B)False

Question 14

When employers amend pension plans to increase benefits to participants,which one of the following is created?

Accepted Answer

A) Prior service cost 
B) Cumulative obligation gain or loss 
C) Transition asset 
D) Transition liability 
A) Prior service cost 
B) Cumulative obligation gain or loss 
C) Transition asset 
D) Transition liability

Question 15

Defined contribution plans specify the amount of cash that the employer puts into the plan for the benefit of the employee.

Accepted Answer

A) True 
 B)False

Question 16

The difference between actuarial assumptions and actual experience for a given year will not impact that year's pension expense.

Accepted Answer

A) True 
 B)False

Question 17

A company instituted an IRS approved plan to fund a percentage of each employee's salary to a plan that would pay benefits to the employee after termination of services.This plan is a

Accepted Answer

A) defined benefit pension plan. 
B) defined contribution pension plan. 
C) government sponsored pension plan. 
D) postretirement benefit plan. 
A) defined benefit pension plan. 
B) defined contribution pension plan. 
C) government sponsored pension plan. 
D) postretirement benefit plan.

Question 18

A pension liability arises when

Accepted Answer

A) pension funding exceeds plan assets. 
B) accumulated benefit obligation exceeds plan assets. 
C) plan assets exceeds pension expense. 
D) pension expense exceeds pension funding. 
A) pension funding exceeds plan assets. 
B) accumulated benefit obligation exceeds plan assets. 
C) plan assets exceeds pension expense. 
D) pension expense exceeds pension funding.

Question 19

For income tax purposes,pension plan sponsors deduct the amount of the

Accepted Answer

A) pension expense. 
B) service cost. 
C) plan contribution. 
D) service cost plus net amortization and deferral. 
A) pension expense. 
B) service cost. 
C) plan contribution. 
D) service cost plus net amortization and deferral.

Question 20

The economic status of the pension plan at a given date is the difference between the fair value of the plan assets and the projected benefit obligation.

Accepted Answer

A) True 
 B)False

Prior service cost is the increase in the projected benefit obligation created by pension plan amendments.

The service cost of a defined benefit pension plan is the

If the beginning unrecognized gains are $30,000,the fair value of the plan assets is $200,000 at the beginning of 2014,and the average remaining service period of active employees is 10 years,the amortization of accumulated unrecognized gains for 2014 is

The interest cost component of a defined benefit pension plan is the portion of expense due to the passage of time.

The income statement reporting for other postretirement benefits is based on the

A company instituted an IRS approved plan to contribute monies to a plan that would pay each employee a percentage of his or her highest year of salary for each year of service upon termination of services.This plan is a

The interest cost component of pension expense in year two is determined by multiplying the projected benefit obligation at the beginning of year two by the discount rate.

The amount of the cumulative gain or loss in excess of the corridor threshold is amortized to the pension expense over the average remaining service period of the employees.

When accounting for funded postretirement benefit plans,actual return on plan assets is deducted from the postretirement benefit expense.

Companies can influence the calculation of pension expense by choosing a higher or lower discount rate and/or by choosing a higher or lower expected rate of return on plan assets.

A major difference between accounting for postretirement benefit plans and pension plans is that

The minimum pension liability that must be shown on the balance sheet of the plan sponsor is the excess of the projected benefit obligation over the plan assets at fair value.

When employers amend pension plans to increase benefits to participants,which one of the following is created?

Defined contribution plans specify the amount of cash that the employer puts into the plan for the benefit of the employee.

The difference between actuarial assumptions and actual experience for a given year will not impact that year's pension expense.

A company instituted an IRS approved plan to fund a percentage of each employee's salary to a plan that would pay benefits to the employee after termination of services.This plan is a

A pension liability arises when

For income tax purposes,pension plan sponsors deduct the amount of the

The economic status of the pension plan at a given date is the difference between the fair value of the plan assets and the projected benefit obligation.

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

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Exam 14: Pensions and Postretirement Benefits

Prior service cost is the increase in the projected benefit obligation created by pension plan amendments.

The service cost of a defined benefit pension plan is the

If the beginning unrecognized gains are $30,000,the fair value of the plan assets is $200,000 at the beginning of 2014,and the average remaining service period of active employees is 10 years,the amortization of accumulated unrecognized gains for 2014 is

The interest cost component of a defined benefit pension plan is the portion of expense due to the passage of time.

The income statement reporting for other postretirement benefits is based on the

A company instituted an IRS approved plan to contribute monies to a plan that would pay each employee a percentage of his or her highest year of salary for each year of service upon termination of services.This plan is a

The interest cost component of pension expense in year two is determined by multiplying the projected benefit obligation at the beginning of year two by the discount rate.

The amount of the cumulative gain or loss in excess of the corridor threshold is amortized to the pension expense over the average remaining service period of the employees.

When accounting for funded postretirement benefit plans,actual return on plan assets is deducted from the postretirement benefit expense.

Companies can influence the calculation of pension expense by choosing a higher or lower discount rate and/or by choosing a higher or lower expected rate of return on plan assets.

A major difference between accounting for postretirement benefit plans and pension plans is that

The minimum pension liability that must be shown on the balance sheet of the plan sponsor is the excess of the projected benefit obligation over the plan assets at fair value.

When employers amend pension plans to increase benefits to participants,which one of the following is created?

Defined contribution plans specify the amount of cash that the employer puts into the plan for the benefit of the employee.

The difference between actuarial assumptions and actual experience for a given year will not impact that year's pension expense.

A company instituted an IRS approved plan to fund a percentage of each employee's salary to a plan that would pay benefits to the employee after termination of services.This plan is a

A pension liability arises when

For income tax purposes,pension plan sponsors deduct the amount of the

The economic status of the pension plan at a given date is the difference between the fair value of the plan assets and the projected benefit obligation.

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