Question 1

Interest cost is calculated by multiplying the:

Accepted Answer

A)  ABO by the expected return on the plan assets.
B)  ABO by the discount rate.
C)  PBO by the expected return on plan assets.
D)  PBO by the discount rate.

Question 2

The employer has an obligation to provide future benefits for:

Accepted Answer

A)  Defined benefit pension plans.
B)  Defined contribution pension plans.
C)  Defined benefit and defined contribution plans.
D)  None of these.

Question 3

The APBO increases each year by the:

Accepted Answer

A)  Interest accrued on the APBO and the portion of the EPBO attributed to that year.
B)  Interest accrued on the EPBO and the portion of the EPBO attributed to that year.
C)  Interest accrued on the APBO and the portion of the APBO attributed to that year
D)  Interest accrued on the EPBO and the portion of the APBO attributed to that year.

Question 4

The amount of cash paid annually for unfunded postretirement health benefit plans, assuming they are not independently insured, usually is equal to:

Accepted Answer

A)  The amount required by the actuarial formula.
B)  The present value of future benefits.
C)  The amount necessary to cover future benefits.
D)  The amount necessary to pay the current year's health care cost.

Question 5

With pensions, service cost reflects additional benefits employees earn from an additional year's service. The service cost for retiree health care plans is:

Accepted Answer

A)  An allocation to the current year of a portion of an estimated fixed total cost.
B)  An allocation to the current year of a portion of an existing liability.
C)  An amount earned by a defined benefit formula.
D)  The amount paid to retired employees.

Question 6

With respect to Ralph, what is Oregon's expected postretirement benefit obligation (EPBO)  at the end of 2009, rounded to the nearest dollar?

Accepted Answer

A)  $137,045
B)  $205,593
C)  $246,810
D)  $768,000

Question 7

Waddle Company amended its defined benefit pension plan on January 1, 2009, to increase retirement benefits earned with each service year. The actuary estimated the prior service cost to be $216,000. Waddle's 80 present employees are expected to retire at the rate of about 10 each year at the end of each of the next 8 years.
Required:
1. Using the service method, calculate the amount of prior service cost to be amortized to pension expense in 2009.
2. Using the straight-line method, calculate the amount of prior service cost to be amortized to pension expense in 2009.

Accepted Answer

Requirement 1
Requir...

Question 8

Data for 2009 were as follows: PBO, January 1, $240,000 and December 31, $270,000; pension plan assets (fair value)  January 1, $180,000, and December 31, $230,000. The projected benefit obligation was underfunded at the end of 2009 by:

Accepted Answer

A)  $30,000.
B)  $60,000.
C)  $20,000.
D)  $40,000.

Question 9

What was PVE's pension expense for the year?

Accepted Answer

A)  $250.
B)  $50.
C)  $68.
D)  $62.Service cost (from PBO column)  = $85 Interest cost (from PBO column)  = $25Expected return on assets (from plan assets column)  = $(55) Amortization of prior service cost = $60 54 (from prior service column)  = $6Amortization of net loss (from net loss column)  = $1Pension expense = $85 + 25 55 + 6 +1 = $62

Question 10

Carpenter Gems began the year with a net pension liability of $84 million (underfunded pension plan). Pension expense for the year included the following ($ in millions): service cost, $30; interest cost, $18; expected return on assets, $12; amortization of net loss, $6.
Required:
Prepare the appropriate general journal entry to record Carpenter's pension expense.

Accepted Answer

The answer of Carpenter Gems began the year with a...

Question 11

Conceptually, the service method provides a better matching of costs and benefits in amortizing prior service cost than does the straight-line method.

Accepted Answer

A) True 
 B)False

Question 12

Amortizing prior service cost for pension plans will:

Accepted Answer

A)  Increase retained earnings and increase accumulated other comprehensive income.
B)  Decrease retained earnings and decrease accumulated other comprehensive income.
C)  Increase retained earnings and decrease accumulated other comprehensive income.
D)  Decrease retained earnings and increase accumulated other comprehensive income.

Question 13

ERISA made major changes in the requirements for pension plan:

Accepted Answer

A)  Vesting.
B)  Reporting.
C)  Taxing.
D)  Investing.

Question 14

A statement of comprehensive income does not include:

Accepted Answer

A)  Net income.
B)  Losses from the return on assets exceeding expectations.
C)  Losses from changes in estimates regarding the PBO.
D)  Prior service cost.

Question 15

The net pension liability (PBO minus plan assets)  is decreased by:

Accepted Answer

A)  Service cost.
B)  Expected return on plan assets.
C)  Amortization of net gain-AOCI.
D)  Prior service cost.

Question 16

Wainright Co. began the year with a net pension liability of $112 million (underfunded pension plan). Pension expense for the year included the following ($ in millions): service cost, $40; interest cost, $24; expected return on assets, $16; amortization of net loss, $8; amortization of prior service cost, $12.
Required:
Prepare the appropriate general journal entry to record Wainright's pension expense.

Accepted Answer

The answer of Wainright Co. began the year with a...

Question 17

Recording the expense for postretirement benefits will not:

Accepted Answer

A)  Increase the APBO.
B)  Increase the postretirement benefit assets.
C)  Decrease the prior service cost.
D)  Increase the net loss-AOCI.

Question 18

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

Accepted Answer

A)  Return on plan assets.
B)  Prior service cost.
C)  Retiree benefits paid.
D)  Gains and losses.

Question 19

Why did the loss result in a reduction in accumulated other comprehensive income?

Accepted Answer

Gains and losses become part of either a...

Question 20

Under SFAS 106, accounting for postretirement benefits other than pensions must adhere to the:

Accepted Answer

A)  Accrual basis of accounting.
B)  Cash basis of accounting.
C)  Modified accrual basis.
D)  Modified cash basis.

Exam 17: Pensions and Other Postretirement Benefits

The APBO increases each year by the:

Correct Answer
verified

With respect to Ralph, what is Oregon's expected postretirement benefit obligation (EPBO) at the end of 2009, rounded to the nearest dollar?

Correct Answer
verified

Amortizing prior service cost for pension plans will:

Correct Answer
verified

The amount of cash paid annually for unfunded postretirement health benefit plans, assuming they are not independently insured, usually is equal to:

Correct Answer
verified

Correct Answer
verified

Data for 2009 were as follows: PBO, January 1, $240,000 and December 31, $270,000; pension plan assets (fair value) January 1, $180,000, and December 31, $230,000. The projected benefit obligation was underfunded at the end of 2009 by:

Correct Answer
verified

Under SFAS 106, accounting for postretirement benefits other than pensions must adhere to the:

Correct Answer
verified

The net pension liability (PBO minus plan assets) is decreased by:

Correct Answer
verified

Correct Answer
verified

Conceptually, the service method provides a better matching of costs and benefits in amortizing prior service cost than does the straight-line method.

Correct Answer
verified

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

Correct Answer
verified

With pensions, service cost reflects additional benefits employees earn from an additional year's service. The service cost for retiree health care plans is:

Correct Answer
verified

Correct Answer
verified
Requirement 1
Requir...
View Answer

A statement of comprehensive income does not include:

Correct Answer
verified

ERISA made major changes in the requirements for pension plan:

Correct Answer
verified

Why did the loss result in a reduction in accumulated other comprehensive income?

Correct Answer
verified
Gains and losses become part of either a...
View Answer

The employer has an obligation to provide future benefits for:

Correct Answer
verified

Recording the expense for postretirement benefits will not:

Correct Answer
verified

Interest cost is calculated by multiplying the:

Correct Answer
verified

What was PVE's pension expense for the year?

Correct Answer
verified

Exam 17: Pensions and Other Postretirement Benefits

The APBO increases each year by the:

Correct AnswerverifiedShow Answer

With respect to Ralph, what is Oregon's expected postretirement benefit obligation (EPBO) at the end of 2009, rounded to the nearest dollar?

Correct AnswerverifiedShow Answer

Amortizing prior service cost for pension plans will:

Correct AnswerverifiedShow Answer

The amount of cash paid annually for unfunded postretirement health benefit plans, assuming they are not independently insured, usually is equal to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Data for 2009 were as follows: PBO, January 1, $240,000 and December 31, $270,000; pension plan assets (fair value) January 1, $180,000, and December 31, $230,000. The projected benefit obligation was underfunded at the end of 2009 by:

Correct AnswerverifiedShow Answer

Under SFAS 106, accounting for postretirement benefits other than pensions must adhere to the:

Correct AnswerverifiedShow Answer

The net pension liability (PBO minus plan assets) is decreased by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Conceptually, the service method provides a better matching of costs and benefits in amortizing prior service cost than does the straight-line method.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

With pensions, service cost reflects additional benefits employees earn from an additional year's service. The service cost for retiree health care plans is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedRequirement 1Requir...View AnswerShow Answer

A statement of comprehensive income does not include:

Correct AnswerverifiedShow Answer

ERISA made major changes in the requirements for pension plan:

Correct AnswerverifiedShow Answer

Why did the loss result in a reduction in accumulated other comprehensive income?

Correct AnswerverifiedGains and losses become part of either a...View AnswerShow Answer

The employer has an obligation to provide future benefits for:

Correct AnswerverifiedShow Answer

Recording the expense for postretirement benefits will not:

Correct AnswerverifiedShow Answer

Interest cost is calculated by multiplying the:

Correct AnswerverifiedShow Answer

What was PVE's pension expense for the year?

Correct AnswerverifiedShow Answer

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Requirement 1
Requir...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Gains and losses become part of either a...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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