Exam 7: Pensions and Other Employee Future Benefits

Explain the accounting for defined contribution plans and also discuss why it is straightforward.

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

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

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?

The following table provides information for a defined benefit pension plan: Required: Compute the amount of other comprehensive income for 2016 to 2018.

Which of the following component refers to the benefits earned by employees in a defined benefit plan?

At the beginning of the current year,a pension has assets of $58,600,000 and accrued benefit obligation of $69,500,000.During the year,the sponsor recorded $3,100,000 in pension expense and contributed $4,000,000 to the pension plan.At the end of the year,the plan assets had fair value of $55,400,000 while the plan obligations had a present value of $64,000,000. Required: Compute the amount of other comprehensive income relating to the pension plan for the year.

What is the fundamental difference between a defined contribution and a defined benefit pension plan?

Bram Masons' balance sheet shows a defined benefit liability of $740,000.Records show that there are $89,000 of past service costs and $610,000 of actuarial gains that remain unamortized. Required: Using the pension reconciliation required in Bram's note disclosures,determine the pension plan's surplus or deficit.

Which statement is correct?

A company has a defined benefit pension liability of $3,750,000 at the end 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 the beginning of the year.

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."

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%.

For the following items indicate if they are components of pension expense or OCI:

A company reported $350,000 of pension expense in its income statement.The balance sheet showed that the pension liability increased by $20,000 over the year.How much cash was paid to the pension trustee during the period?

Identify whether each of the following descriptions of pension plans describes defined contribution plans,defined benefit plans,both,or neither.

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

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).

Humming Furnishings produces quality household furniture.The company has only one defined benefit pension plan,which covers its 30 carpenters.The company has completed its accounting for the year and closed its books.The draft financial statements show a defined benefit liability of $90,000.Your review of the company's records shows that the pension plan has a deficit of $250,000.The company's working papers show that $80,000 of actuarial losses remain unamortized at year-end,and $16,000 of past service cost was amortized during the year. Required: Determine the number of years that remain until employees are entitled to receive the additional benefits related to the past service cost.

Five Star Hotels provides a defined benefit pension for its employees.At the end of fiscal year 2016,which ended on December 31,the pension plan supplied Five Star Hotels with information about the pension,which is summarized in the following table: Required: Provide the journal entries for Five Star's pension plan for 2016