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Exam 17: Pensions and Other Postretirement Benefits

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Question 1

Multiple Choice

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Prior to 1993, postretirement benefits other than pensions generally were accounted for on the:

A) Accrual basis.
B) Cash basis.
C) Modified accrual basis.
D) Hybrid basis.

E) B) and C)
F) C) and D)

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Question 2

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Pension expense and funding amounts are both accounting decisions.

A) True
B) False

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Question 3

Multiple Choice

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What is the present value of Ralph's net benefits as of his expected retirement date, rounded to the nearest dollar?

The components of postretirement benefit expense are similar to the components of pension expense. How does the service cost component differ between the two expenses?

The EPBO for a particular employee on January 1, 2013, was $30,000. The APBO at the beginning of the year was $6,000. The appropriate discount rate for this postretirement plan is 5%. The employee is expected to serve the company for a total of 25 years with 5 of those years already served as of January 1, 2013. What is the APBO at December 31, 2013?

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 2012. As of the end of 2013, 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 2013? 2) What is the accumulated postretirement benefit obligation at the end of 2013?

Prior service cost is expensed immediately using:

What was PVE's pension expense for the year?

Colombo Enterprises has a defined benefit pension plan. At the end of the reporting year, the following data were available: beginning PBO, $75,000; service cost, $14,000; interest cost, $6,000; benefits paid for the year, $9,000; ending PBO, $89,000; and the expected return on plan assets, $10,000. There were no other pension-related costs. The journal entry to record the annual pension costs will include a debit to pension expense for:

The portion of the obligation that plan participants are entitled to receive regardless of their continued employment is called the:

Amortizing prior service cost for pensions and other postretirement benefit plans will:

On December 31, 2013, the following pension-related data were available for CPS Industries' noncontributory, defined benefit pension plan: Required: 1) Prepare the 2013 journal entry to record pension expense. 2) How will the statement of comprehensive income be affected by any 2013 gains and losses?

Which of the following describes defined benefit pension plans?

Which of the following is a correct statement concerning the reporting of the pension plan on the face of the employer's balance sheet?

Discuss income smoothing as the term relates to pension plans.

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

What is the correct entry to record postretirement benefit expense for the current year?

What is Havana's 2013 gain or loss on plan assets?

An increase in the assumed rate of salary progression increases the projected benefit obligation. The higher the salary levels are at retirement, the higher the PBO. When the obligation increases, it is reported as a loss. 2. U.S. GAAP requires that actuarial gains and losses be included among OCI items in the statement of comprehensive income, thus subsequently become part of AOCI.

Lasagna Corporation has a defined benefit pension plan. Lasagna received the following information for the current calendar year: The expected long-term return on plan assets is 10%. There were no other relevant data for the year. Required: 1) Determine Lasagna Corporation's pension expense for the year. 2) Prepare the journal entries to record the pension expense and funding for the year.