Question 1

Which of the following is a way of measuring the pension benefit obligation?

Accepted Answer

A) employer benefit obligation 
B) retiree benefit obligation 
C) projected benefit obligation 
D) future benefit obligation 
A) employer benefit obligation 
B) retiree benefit obligation 
C) projected benefit obligation 
D) future benefit obligation C

Question 2

Net pension liability is increased by ________.

Accepted Answer

A) employer contributions to plan assets 
B) service costs 
C) expected return on plan assets 
D) amortization of prior service costs 
A) employer contributions to plan assets 
B) service costs 
C) expected return on plan assets 
D) amortization of prior service costs B

Question 3

The difference between pension plan assets and the PBO is equal to the funded status of the plan.

Accepted Answer

A) True 
 B)False  True

Question 4

A net pension liability is the excess of the projected benefit obligation over the plan assets.

Accepted Answer

A) True 
 B)False

Question 5

An underfunded pension plan increases a company's leverage.

Accepted Answer

A) True 
 B)False

Question 6

If a pension plan is overfunded,it means that the ________.

Accepted Answer

A) ABO exceeds plan assets 
B) PBO is less than plan assets 
C) ABO is less than plan assets 
D) PBO exceeds plan assets 
A) ABO exceeds plan assets 
B) PBO is less than plan assets 
C) ABO is less than plan assets 
D) PBO exceeds plan assets

Question 7

Compensation expense associated with stock options is ________.

Accepted Answer

A) based upon the book value of the options 
B) based upon the estimated fair value of the options 
C) recorded on the date that the options are granted 
D) allocated as expense over the time period until the options expire 
A) based upon the book value of the options 
B) based upon the estimated fair value of the options 
C) recorded on the date that the options are granted 
D) allocated as expense over the time period until the options expire

Question 8

When compensation is recognized under an equity classified award,expiration of stock options is treated as ________.

Accepted Answer

A) a prior period adjustment 
B) an adjustment to compensation expense 
C) an adjustment to shareholder's equity 
D) a change in accounting estimate 
A) a prior period adjustment 
B) an adjustment to compensation expense 
C) an adjustment to shareholder's equity 
D) a change in accounting estimate

Question 9

An employee who receives an equity-classified award has the right to receive shares of stock.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is a characteristic of the accumulated benefit obligation measurement?

Accepted Answer

A) It considers only vested employees. 
B) It does not use projected future salary levels. 
C) It is required by GAAP for measurement of the pension obligation. 
D) It considers only current employees. 
A) It considers only vested employees. 
B) It does not use projected future salary levels. 
C) It is required by GAAP for measurement of the pension obligation. 
D) It considers only current employees.

Question 11

An employee will not redeem a liability-classified award when the stock is out of the money.

Accepted Answer

A) True 
 B)False

Question 12

The projected benefit obligation (PBO)is decreased by ________.

Accepted Answer

A) payment of retirement benefits 
B) a return on plan assets that is higher than expected 
C) an increase in the average life expectancy of employees 
D) a decrease in the actuary's assumed discount rate 
A) payment of retirement benefits 
B) a return on plan assets that is higher than expected 
C) an increase in the average life expectancy of employees 
D) a decrease in the actuary's assumed discount rate

Question 13

List and explain the factors that are important in accounting for stock-based compensation plans.

Accepted Answer

1.Exercise price or strike price-the fix

Question 14

A stock option plan is generally revalued whenever there is a change in the estimated percentage of options that will be forfeited.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is a characteristic of a defined contribution plan?

Accepted Answer

A) Employee contributions are typically based upon salary levels. 
B) Employers must make contributions for prior service costs to a defined contribution plan. 
C) Pension plan assets draw interest that may be used to reduce annual contributions to the plan. 
D) Employers bear the risk of loss on pension fund assets. 
A) Employee contributions are typically based upon salary levels. 
B) Employers must make contributions for prior service costs to a defined contribution plan. 
C) Pension plan assets draw interest that may be used to reduce annual contributions to the plan. 
D) Employers bear the risk of loss on pension fund assets.

Question 16

The portion of the obligation than plan participants are entitled to receive regardless of their continued employment is called the ________.

Accepted Answer

A) retiree benefit obligation 
B) projected benefit obligation 
C) accumulated benefit obligation 
D) vested benefit obligation 
A) retiree benefit obligation 
B) projected benefit obligation 
C) accumulated benefit obligation 
D) vested benefit obligation

Question 17

An employee will generally exercise stock options only when the current market price is above the exercise price of the option.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a characteristic of a defined benefit pension plan?

Accepted Answer

A) It raises few accounting issues for employers. 
B) Retirement benefits are based on the plan benefit formula. 
C) It is simple to construct. 
D) Retirement benefits are contingent on how much an employee has accumulated in a retirement account. 
A) It raises few accounting issues for employers. 
B) Retirement benefits are based on the plan benefit formula. 
C) It is simple to construct. 
D) Retirement benefits are contingent on how much an employee has accumulated in a retirement account.

Question 19

List and describe the five components of annual pension expense.

Accepted Answer

1.Service cost-Service cost is the incre

Question 20

A company's defined benefit pension plan had a projected benefit obligation (PBO)of $350,000 on January 1,Year 1.During Year 1,pension benefits paid were $60,000,The discount rate for the plan for Year 1 was 11%.Service cost for the year was $90,000.Plan assets (fair value)increased during the year by $50,000.What was the PBO at December 31,Year 1?

Accepted Answer

A) $290,000 
B) $368,500 
C) $380,000 
D) $418,500 
A) $290,000 
B) $368,500 
C) $380,000 
D) $418,500

Exam 20: Accounting for Employee Compensation and Benefits

Which of the following is a way of measuring the pension benefit obligation?

Net pension liability is increased by ________.

The difference between pension plan assets and the PBO is equal to the funded status of the plan.

A net pension liability is the excess of the projected benefit obligation over the plan assets.

An underfunded pension plan increases a company's leverage.

If a pension plan is overfunded,it means that the ________.

Compensation expense associated with stock options is ________.

When compensation is recognized under an equity classified award,expiration of stock options is treated as ________.

An employee who receives an equity-classified award has the right to receive shares of stock.

Which of the following is a characteristic of the accumulated benefit obligation measurement?

An employee will not redeem a liability-classified award when the stock is out of the money.

The projected benefit obligation (PBO)is decreased by ________.

List and explain the factors that are important in accounting for stock-based compensation plans.

A stock option plan is generally revalued whenever there is a change in the estimated percentage of options that will be forfeited.

Which of the following is a characteristic of a defined contribution plan?

The portion of the obligation than plan participants are entitled to receive regardless of their continued employment is called the ________.

An employee will generally exercise stock options only when the current market price is above the exercise price of the option.

Which of the following is a characteristic of a defined benefit pension plan?

List and describe the five components of annual pension expense.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

OL: Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Earnings Per Share

Accounting Corrections and Error Analysis

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