Question 1

Exhibit 19-01
Marley Co. has an underfunded prepaid/accrued pension cost of $2,000 debit balance) at December 31, 2015. The following information pertains to 2016: 
-Refer to Exhibit 19-1. The December 31, 2016, adjusting entry should be

Accepted Answer

The answer of Exhibit 19-01
Marley Co. has an underfunded prepaid/accrued...

Question 2

What three methods are available to provide guidance for companies to recognize gains or losses in pension expense?

Accepted Answer

The answer of What three methods are available to provide...

Question 3

Joan, Inc. started a pension plan on January 1, 2016. At that date, prior service cost of $1,100,000 was recognized as a result of prior service credit granted to existing employees. At December 31, 2016, the following information was available:  Required: 
a. Compute the pension expense for 2016.
b. Prepare appropriate journal entries for 2016.

Accepted Answer

The answer of Joan, Inc. started a pension plan on...

Question 4

Current GAAP requires that a company with a defined benefit pension plan disclose a reconciliation of the beginning and ending balances of the projected benefit obligation.
Required:
State the items that must be included in this disclosure.

Accepted Answer

The answer of Current GAAP requires that a company with...

Question 5

The defined benefit plan is a type of plan in which the employer's contribution into the pension fund is based on a formula.

Accepted Answer

A) True 
 B)False

Question 6

John Company adopted a defined benefit pension plan on January 1, 2015, and prior service credit was granted to employees. The present value of that prior service obligation as of January 1, 2015 was $1,400,000 and is being amortized by the straight-line method over the remaining 20-year service life of the company's active employees. Additional information relating to the company's pension plan for 2015 is presented below:  What amount should be recorded in Prepaid/Accrued Pension Cost when recording the 2015 pension expense and funding at December 31, 2015?

Accepted Answer

A)  $1,200 
B)  $48,000 
C)  $87,000 
D)  $94,800

Question 7

Define the following:
expected postretirement benefit obligation EPBO)
accumulated postretirement benefit obligation APBO)

Accepted Answer

The answer of Define the following:
expected postretirement benefit obligation EPBO)
accumulated...

Question 8

With respect to the process of assigning the cost of postretirement benefits to periods of employee service, attribution period ends at

Accepted Answer

A)  the expected retirement date. 
B)  the actual retirement date. 
C)  the full eligibility date. 
D)  either a or b.

Question 9

Which of the following is not one of the pension expense components that a company recognizes?

Accepted Answer

A)  expected return on plan assets 
B)  service cost 
C)  amortization of prior service cost 
D)  administrative cost

Question 10

In June 2011, the IASB amended IAS 19, Employee Benefits, and significantly changed the method of accounting for defined benefit plan pensions. Regarding these changes, which of the following statements is false?

Accepted Answer

A)  Prior to this amendment, the basic principles of accounting for defined benefit plans under IFRS were the same as U.S. GAAP. 
B)  Under IAS 19, prior service cost is immediately recognized on the income statement as an expense, while under U.S. GAAP prior service cost is recognized in other comprehensive income and reported as a component of accumulated other comprehensive income on the balance sheet. 
C)  The changes in the amendment to IAS 19 make it less likely that GAAP will change to converge with IFRS for pension accounting. 
D)  The major result of the IASB amendments was to remove many of the smoothing devices in pension accounting.

Question 11

The Lucas Company offers employees a defined contribution pension plan. In 2015, Lucas contributed $175,000 to the plan, which paid $195,000 to retired employees. Which of the following statements is true?

Accepted Answer

A)  Lucas will record an accrued liability of $20,000. 
B)  Lucas will report pension expense of $175,000. 
C)  Lucas will recognize prior service cost of $20,000. 
D)  Lucas will recognize actuarial gains and losses on the plan over current and future periods.

Question 12

The corridor is defined as 10% of the greater of the beginning of the year projected benefit obligation or the end of the year fair value of the plan.

Accepted Answer

A) True 
 B)False

Question 13

With respect to the process of assigning the cost of postretirement benefits to periods of employee service, the attribution period starts on the

Accepted Answer

A)  hiring date. 
B)  vesting date. 
C)  termination date. 
D)  retirement date.

Question 14

Current GAAP regarding employers' accounting for defined benefit pension plans defines a pension plan as being underfunded at the end of the period when the

Accepted Answer

A)  fair value of plan assets exceeds the projected benefit obligation. 
B)  projected benefit obligation exceeds the fair value of plan assets. 
C)  accumulated benefit obligation exceeds the fair value of the plan assets. 
D)  fair value of the plan assets exceed the accumulated benefit obligation.

Question 15

In the computation of pension expense, interest cost is the

Accepted Answer

A)  expected increase in the plan assets due to investing activities. 
B)  increase in the projected benefit obligation due to the passage of time. 
C)  actuarial present value of benefits. 
D)  expected return on plan assets.

Question 16

Which of the following pension-related definitions is not correct?

Accepted Answer

A)  Vested benefits are payments that are not contingent on the employee's continuing in the service of the employer. 
B)  Present value is the current worth of an amount or amounts payable or receivable in the future. 
C)  Actuarial assumptions are those made by actuaries concerning future events affecting pension costs. 
D)  Service cost is the amount paid annually to a funding agency under an unfunded pension plan.

Question 17

Amortization of any net gain or loss is included in pension expense of a given year if at the

Accepted Answer

A)  end of the year, the cumulative net gain or loss exceeds 10% of the greater of the actual projected benefit obligation or the fair value of the plan assets. 
B)  beginning of the year, the cumulative net gain or loss exceeds 10% of the greater of the actual accumulated benefit obligation or the fair value of the plan assets. 
C)  end of the year, the cumulative gain or loss exceeds 10% of the greater of the actual accumulated benefit obligation or the fair value of the plan assets. 
D)  beginning of the year, the cumulative gain or loss exceeds 10% of the greater of the actual projected benefit obligation or the fair value of the plan assets.

Question 18

Which of the following statements is true?

Accepted Answer

A)  Funding for postretirement health care benefits is legally required, and contributions are tax deductible. 
B)  Funding for postretirement health care benefits is legally required, but contributions are not tax deductible. 
C)  Funding for postretirement health care benefits is not legally required, and contributions are not tax deductible. 
D)  Funding for postretirement health care benefits is not legally required, but contributions are tax deductible.

Question 19

The projected benefit obligation PBO) is equal to the

Accepted Answer

A)  actuarial present value of all benefits earned as of a specified date, both vested and nonvested, by employees using current salary levels in the pension plan formula. 
B)  difference between the annual pension expense and the amount actually funded during the year. 
C)  actuarial present value of all benefits earned as of a specified date, both vested and nonvested, by employees using anticipated future salary levels in the pension plan formula. 
D)  actuarial present value of benefits attributed by the pension plan formula to services rendered by employees during the current year.

Question 20

What are the three major differences between the accounting for pensions and the accounting for other
Postretirement Benefits OPRB's)?

Accepted Answer

The answer of What are the three major differences between...

Exam 19: Accounting for Post-Retirement Benefits

Exhibit 19-01 Marley Co. has an underfunded prepaid/accrued pension cost of $2,000 debit balance) at December 31, 2015. The following information pertains to 2016: -Refer to Exhibit 19-1. The December 31, 2016, adjusting entry should be