Exam 17: Pensions and Other Postretirement Benefits

Rodeo Corporation amended its defined benefit pension plan on January 31,2016,to increase retirement benefits earned with each service year.The actuary estimated the prior service cost to be $216,000.Rodeo's 80 present employees are expected to retire at the rate of about 10 each year at the end of each of the next eight years beginning on December 31,2016. Required: Using the service method,calculate the amount of prior service cost to be amortized to pension expense in each of the next eight years.

Pension expense is decreased by:

Crystal Company has an unfunded retiree health care plan.Each of the company's four employees has been with the organization since its inception at the beginning of 2015.As of the end of 2016,the actuary estimates the total net cost of providing benefits to employees during their retirement years to have a present value of $196,000.Each of the employees will become fully eligible for benefits after 28 more years of service,but aren't expected to retire for 30 more years.The interest rate is 8%. Required: 1)What is the expected postretirement benefit obligation at the end of 2016? 2)What is the accumulated postretirement benefit obligation at the end of 2016? 3)What is the expected postretirement benefit obligation at the end of 2017? 4)What is the accumulated postretirement benefit obligation at the end of 2017?

A statement of comprehensive income does not include:

What was the PBO at the beginning of the year?

On January 1 of the current reporting year,Coda Company's projected benefit obligation was $30 million.During the year,pension benefits paid by the trustee were $4 million.Service cost was $10 million.Pension plan assets earned $5 million as expected.At the end of the year,there was no net gain or loss and no prior service cost.The actuary's discount rate was 10%. Required: Determine the amount of the projected benefit obligation at December 31.

Careful Consulting Company has an unfunded postretirement benefit plan.On December 31,2016,the following data were available concerning changes in the plan's accumulated postretirement benefit obligation with respect to one of Careful's employees: Required: 1)Over how many years is the expected postretirement benefit obligation being expensed? 2)What is the expected postretirement benefit obligation at the end of 2016? 3)When was the employee hired? 4)What is the expected postretirement benefit obligation at the beginning of 2016?

Pension data for Goldman Company included the following for the current calendar year: Required: Determine pension expense for the year.

Which of the following is not included among the assumptions needed to estimate postretirement health care benefits?

The following information is related to the defined benefit pension plan of Dreamworld Company for the year: Assuming no other relevant data exist,what is the pension expense for the year?

Silver Springs Company has an unfunded retiree health care plan.Each of the company's four employees has been with the organization since its inception at the beginning of 2015.As of the end of 2016,the actuary estimates the total net cost of providing benefits to employees during their retirement years to have a present value of $196,000.Each of the employees will become fully eligible for benefits after 28 more years of service,but aren't expected to retire for 30 more years.The interest rate is 8%. Required: 1)What is the expected postretirement benefit obligation at the end of 2016? 2)What is the accumulated postretirement benefit obligation at the end of 2016?

Louie Company has a defined benefit pension plan.On December 31 (the end of the fiscal year),the company received the PBO report from the actuary.The following information was included in the report: ending PBO,$110,000;benefits paid to retirees,$10,000;interest cost,$8,000.The discount rate applied by the actuary was 8%.What was the service cost for the year?

Which of the following is not a potential component of pension expense?

Which of the following is not an uncertainty that complicates determining how much to set aside each year to ensure that sufficient funds are available to provide the benefits promised under a defined benefit plan?

Which of the following is not usually part of the pension formula under a defined benefit plan?

Suppan Service began the year with a net pension liability of $56 million (underfunded pension plan).Pension expense for the year included the following ($ in millions): service cost,$20;interest cost,$12;expected return on assets,$8;amortization of net gain,$4. Required: Prepare the appropriate general journal entry to record Suppan's pension expense.

Which of the following is not a characteristic of a qualified pension plan?

JL Health Services reported a net loss-AOCI in last year's balance sheet.This year,the company revised its estimate of future salary levels causing its PBO estimate to decline by $24.Also,the $48 million actual return on plan assets was less than the $54 million expected return.As a result:

What was FRC's pension expense for the year?

The expected postretirement benefit obligation (EPBO)is the discounted present value of the total benefits expected to be paid by the employer to the plan participants.