Retirement Benefits

Question 1

The company amended it’s defined benefit pension plan by giving increased benefits for service provided prior to 2001. The PSC will be reflected in:

Answer 1

PSC will be recognized in 2001 and the future periods

Question 2

What criteria is unique to post retirement healthcare claims only?

Answer 2

Per Capita Claims

Question 3

If Plan assets exceed PBO how would it be reported on B/S

Answer 3

If plan assets are greater than PBO, B/S would report a non current asset
If plan assets are lass than PBO it would be underfunded and B/S would report a non current liability

Question 4

Projected benefit obligation $103,000
Plan assets at fair value 78,000
Net periodic pension cost 90,000
Employer’s contribution 70,000

What amount should Payne record as additional pension liability at December 31, Year 3?

Answer 4

1st step Calc accured Pension Liability
Dr Pension Expense 90,000
Cr Cash Contribution 70,000
Cr Accrued Pension Liability 20,000

2nd step calc additional pension liability(DO T ACCOUNT)

Accrued Pension Liability(T ACCOUNT)			
	CR 20,000 (Accured Pension		
	CR 5,000 (additial Pension Liability)		
	CR 25,000 (Pension Liability reported)		

Note: Ending balance in accrued pension is equal to
difference between PBO and Plan assets

Question 5

PLAN A Plan B
PBO 1,000,000 700,000
FV PA 800,000 1,000,000

How would these defined benefit plans be reported on B/S?

Answer 5

Noncurrent asset of 200,000 and noncurrent liability of 300,000. Note: DO NOT OFFSET ASSET VS LIABILITY on two different plans

Question 6

Pension Expense Calculation

Answer 6

\+PSC
-Return on Plan assets
\+Interest Costs
\+Unexpected Loss(GAINS)
\+Service Cost
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