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Flashcards in PVD Deck (36):
1

Hickman Inc. uses IFRS for financial reporting purposes and has several pension plans covering various classes of employees. When may the company net assets and liabilities of the various plans?

Assets and liabilities may be netted when there is legally enforceable right to use the assets of one plan to settle the obligations of another plan. 

2

ASC Topic 71S requires disclosure of assumed health care cost trend rates for defined benefit postretirement plans. Assumed health care cost trend rates should be disclosed for the 

a. Following year and Years beyond the following year

b. Years beyond the following year

c. Following year

d. Neither

 Following year and Years beyond the following year

3

What is the present value of all future retirement payments attributed by the pension benefit formula to employee services rendered prior to that date only? 

Accumulated benefit obligation. 

4

A necessary condition for the recording of pension liability is present when 

Projected benefit obligation exceeds pension plan assets.

5

The following information pertains to Gali Co.'s defined benefit plan for year 2:

Fair value of plan assets, beginning of year   $350,000

Fair value of plan assets, end of year               525,000

Employer contributions                                      110,000

Benefits paid                                                      85,000

 In computing pension expense, what amount should Gali use as actual return on plan assets?

$150,000

6

Under IFRS, how is the discount rate for pensions determined?

 It is determined by the market yield at the end of the reporting period for high-quality corporate bonds having similar term or maturity.

7

Jerry Corp., a company whose stock is publicly traded, provides noncontributory defined benefit pension plan for its employees. The company's actuary has provided the following information for the year ended December 31, year 5:

Projected benefit obligation                                      $400,000

Accumulated benefit obligation                                   350,000

Plan assets (fair value)                                                  410,000

Service cost                                                                 120,000

Interest on projected benefit obligation                          12,000

Amortization of unrecognized prior service cost            30,000    

Expected and actual return on plan assets                      41,000

The market-related asset value equals the fair value of plan assets. Prior contributions to the defined benefit pension plan equaled the amount of net periodic pension cost accrued for the previous year-end. No contributions have been made for year 5 pension cost. In its December 31, year 5 balance sheet, Jerry should report a pension asset of 

$10,000

8

The following information pertains to Seda Co.'s pension plan: Actuarial estimate of projected benefit obligation

at 1/1/Y2                                         $72,000

Assumed discount rate                          10% 

Service costs for year 2                     18,000

Pension benefits paid during year 2  15,000

If no change in actuarial estimates occurred during year 2, Seda's projected benefit obligation at December 31, year 2, was 

$82,200

9

For defined benefit pension plan, the discount rate used to calculate the projected benefit obligation is determined by the

a. Expected return on plan assets and Actual return on plan assets

b. Neither

c. Expected return on plan assets

d. Actual return on plan assets

Neither

10

An employer sponsoring defined benefit pension plan is subject to the pension liability recognition requirement. A pension liability must be recorded equal to the unfunded 

 Projected benefit obligation less the fair value of plan assets. 

11

An employer's obligation for postretirement health benefits that are expected to be fully provided to or for an employee must be fully accrued by the date the

Employee is fully eligible for benefits. 

12

Cey Company has a defined benefit pension plan. Cay's policy is to fund net periodic pension cost annually, payment to an independent trustee being made 2 months after the end of each year. Data relating to the pension plan for year 5 are as follows:

Net pension cost for year 5                            $190,000

Unrecognized prior service cost, 12/31/Y5        150,000 

Accumulated benefit obligation, 12/31/Y5         480,000

Fair value of plan assets, 12/31/Y5                    500,000

Projected benefit obligation 12/31/Y5               500,000

How much should appear on Cey's balance sheet at December 31, year 5, for pension liability?

   Current         Noncurrent

a. $0                 $480,000

b. $0                 $330,000

c. $190,000      $150,000

d. $190,000      $0

$190,000      $0

13

Kent, Inc., calendar-year company, established defined benefit pension plan in December year I. The following data relate to this plan at December 31, year 3: 

Projected benefit obligation         $4,700,000

Accumulated benefit obligation     4,000,000

Total fair value of plan assets         3,000,000

In its December 31, year 3 balance sheet, Kent should report liability relating to the pension plan of 

$1,700,000

14

Interest cost included in the net pension cost recognized for period by an employer sponsoring defined benefit pension plan represents the 

Increase in the projected benefit obligation due to the passage of time.

15

Parker Co. amended its pension plan on January 2 of the current year. It also granted $600,000 of unrecognized prior service costs to its employees. The employees are all active and expect to provide 2,000 service years in the future, with 350 service years this year. What is Parker's unrecognized prior service cost amortization for the year? 

$105,000 

16

On January I, year 3, Brokaw Company granted retroactive credit for prior service pursuant to a defined benefit pension plan which is noncontributory. The plan amendment increased the projected benefit obligation. The prior service cost resulting from the plan amendment should be 

Amortized by assigning an appropriate amount to each future period of service and including this amortized amount in pension expense for each future period of service. 

17

An entity sponsors a defined benefit pension plan that is underfunded by $800,000. A $500,000 increase in the fair value of plan assets would have which of the following effects on the financial statements of the entity? 

A decrease in the liabilities of the entity. 

18

In which of the following pension instances would the pension asset/liability adjustment (net of tax), be reported on the balance sheet for particular year? 

Only when the projected benefit obligation exceeds plan assets.

19

On June I, year I, Ward Corp. established a defined benefit pension plan for its employees. The following information was available at May 31, year 3:

Projected benefit obligation            $14,500,000

Accumulated benefit obligation        12,000,000

Pension asset/liability                          (200,000)

Plan assets at fair market value          7,000,000

Unrecognized prior service cost        2,550,000

To report the paper pension liability in Ward's May 31, year 3 balance sheet, what is the amount of the adjustment required? 

$7,300,000

20

The following information pertains to Kane Co.'s defined benefit pension plan:

Pension asset (liability), January I, year 5    $ 2,000

Service cost                                                19,000

Interest cost                                                 38,000

Actual return on plan assets                         22,000  Amortization of unrecognized prior

service cost                                                 52,000 

Employer contributions                               40,000 

The fair value of plan assets exceeds the projected benefit obligation. In its December 31, year S income statement, what amount should Kane report as pension cost ?

 $87,000 

21

Note section disclosures in the financial statements for pensions do not require inclusion of which of the following? 

The differences in executive and nonexecutive plans.

22

West Company adopted a defined benefit pension plan on January I, year 4. West amortizes the prior service cost over 15 years and funds prior service cost by making equal payments to the fund trustee at the end of each of the first 10 years. The service (normal) cost is fully funded at the end of each year. The following data are available for year 4:

Service (normal) cost for year 4      $110,000

Prior service cost:                               41,700

Amortized Funded                             57,200

West's pension asset/liability at December 31, year 4, is

$15,500

23

Visor Co. maintains a defined benefit pension plan for its employees. The service cost component of Visor's net periodic pension cost is measured using the

Projected benefit obligation. 

24

An employer sponsoring defined benefit pension plan should disclose the

a. Neither

b. Fair value of plan assets 

c. Amount of unrecognized prior service cost and Fair value of plan assets

d. Amount of unrecognized prior service cost

Amount of unrecognized prior service cost and Fair value of plan assets

25

The vested benefits of an employee in pension plan represent 

Benefits that are not contingent on the employee's continuing in the service of the employer.

26

In the calculation of pension expense recognized for period by an employer sponsoring defined benefit pension plan, which components will not be included?

Excess of accumulated benefit obligation over the fair value of the plan assets. 

27

The pension Rice Corp. adopted a defined benefit pension plan on January I, year I. The plan does not provide any retroactive benefits for existing employees. The pension funding payment is made to the trustee on December 31 each year. The following information is available for year I and year 2:

                                                               Year 1         Year 2

Service cost                                            $150,000    $165,000

Funding payment                                      170,000       185,000 

Interest on projected benefit obligation                           15,000 

Actual return on plan assets                                           18,000

Experience gains or losses      

In its December 31, year 2 balance sheet, Rice should report pension asset/liability of 

$43,000 

28

An employer offered for a short period of time special termination benefits to some employees. The employees accepted the offer, which provided for immediate lump-sum payments and future payments at the end of the next 2 years. The amounts can be reasonably estimated. The amount of expense recognized this year should include 

The lump-sum payments and the present value of the future payments.

29

Which of the following methods is used in IFRS to account for defined benefit pension plans? 

a. Vested years of service method.

b. Benefit-years-of-service method.

c. Accumulated benefits method.

d. Projected-unit-credit method.

Projected-unit-credit method.

30

The present value of pension benefits accrued to date using assumptions as to future compensation levels is the 

 Projected benefit obligation.

31

The following information relates to the year 3 activity of the defined benefit pension plan of Lindy Corp., acompany whose stock is publicly traded:

Service cost                                   $150,000

Return on plan assets                        40,000

Interest cost on pension benefit

obligation                                           82,000

Amortization of actuarial loss              15,000

Amortization of unrecognized

net obligation                                     35,000

Lindy's year 3 pension cost is 

$242,000

32

Which of the following components should be included in the calculation of net pension cost recognized for period by an employer sponsoring defined benefit pension plan?

a. Interest cost

b. Interest cost and Actual return on plan assets

c. Actual return on plan assets

d. Neither

Interest cost and Actual return on plan assets 

33

Interest cost included in the net pension cost recognized by an employer sponsoring defined benefit pension plan represents the

Increase in the projected benefit obligation due to the passage of time.

34

Kemp Company provides a defined benefit postretirement plan for its employees. Kemp adopted the plan on January I, year I, in accordance with the provisions of ASC Topic 715. Data relating to the pension plan for year I are as follows:

Service cost for year I                           28,000

Interest on the accumulated                    

postretirement benefit obligation            5,000

Amortization of the unrecognized    

transition obligation                                8,000

At the end of year I, Kemp makes benefit payment of $10,000 to employees. In its December 31, year I balance sheet, Kemp should record accrued postretirement benefit cost of

$31,000

35

Which of the following components should be included in net pension cost by an employer sponsoring defined benefit pension plan?

a. Amortization of unrecognized prior service cost

b. Amortization of unrecognized prior service cost and Fair value of plan assets 

c. Fair value of plan assets

d. Neither

Amortization of unrecognized prior service cost

36

The following data relates to Nola Co.'s defined benefit pension plan as of December 31, year 3: 

Unfunded accumulated benefit

obligation                                           $140,000

Unrecognized prior service cost            45,000 

Pension asset (liability)                          (80,000)

What amount should Nola report as excess of additional pension liability over unrecognized prior service cost in its statement of stockholders' equity? 

$0