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Exam 17: Pensions and Other Postretirement Benefits

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Question 21

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What are the possible components of pension expense? Which of these elements would exist in every defined benefit plan?

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1) service cost; 2) interest cost; 3) ex...

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Question 22

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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?

A) Employee turnover.
B) Number of employees who retired last year.
C) Future inflation rates.
D) Future compensation levels.

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Question 23

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Compared to the ABO, the PBO usually is:

Defined contribution pension plans that link the amount of contributions to company performance are often called:

The EPBO for a particular employee on January 1, 2009, was $150,000. The APBO at the beginning of the year was $30,000. The appropriate discount rate for this postretirement plan is 5%. The employee is expected to serve the company for a total of twenty-five years with five of those years already served as of January 1, 2009. What is the APBO at December 31, 2009?

When accounting for pensions, delayed recognition of gains and losses in earnings achieves:

The accounting for defined contribution pension plans is easy because each year:

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

Pension data for the Ben Franklin Company include the following for the current calendar year: Discount rate, 8% Expected return on plan assets, 10% Actual return on plan assets, 9% Service cost $200,000 Required: 1) Determine pension expense for the year. 2) Prepare the journal entries to record pension expense and funding for the year. $\begin{array}{l}\text { January 1: }\\\begin{array} { l r } \text { PBO } & \$ 1,400,000 \\\text { ABO } & 1,000,000 \\\text { Plan assets } & 1,500,000 \\\text { Amortization of prior service cost } & 20,000 \\\text { Amortization of net gain } & 4,000 \\\text { cember 31: } & \$ 220,000 \\\text { Cash contributions to pension fund } & 240,000\end{array}\end{array}$

Pension data for Sam Adams Inc. include the following for the current calendar year: Discount rate, 8% Expected return on plan assets, 10% Actual return on plan assets, 9% Service cost $400,000 Required: 1) Determine pension expense for the year. 2) Prepare the journal entries to record pension expense and funding for the year. $\begin{array}{l}\text { January 1: }\\\begin{array} { l r } \text { PBO } & 3,000,000 \\\text { ABO } & 2,000,000 \\\text { Plan assets } & 3,200,000 \\\text { Amortization of prior service cost } & 30,000 \\\text { Amortization of net gain } & 7,000 \\\text { cember 31: } & \$ 275,000 \\\text { Cash contributions to pension fund } & 310,000\end{array}\end{array}$

Assume that at the beginning of the current year, a company has a net gain-AOCI of $25,000,000. At the same time, assume the PBO and the plan assets are $200,000,000 and $150,000,000, respectively. The average remaining service period for the employees expected to receive benefits is 10 years. What is the amount of amortization to pension expense for the year?

A statement of comprehensive income does not include:

To help assess the uncertainties that surround a defined benefit pension plan, corporations frequently hire a(n) :

An overfunded pension plan means that the:

Which of the following is true?

When the service method is used for amortizing prior service costs, the amount recognized each year is

A company's total obligation for postretirement benefits is measured by the:

Amortizing a net loss for pensions will:

On January 1, 2008, WOW amended its defined benefit pension plan. The amount of prior service costs caused by this action was $720,000. WOW uses the service method for amortizing prior service costs. The following service years were provided by the company actuary: 2008, 20; 2009, 15; 2010, 12; 2011, 8; and 2012, 5. Twenty employees benefit from this amendment. In 2009, the amortization amount would be:

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