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Exam 17: Pensions and Other Postretirement Benefits

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Question 101

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The PBO is increased by:

A) An increase in the average life expectancy of employees.
B) Amortization of prior service cost.
C) An increase in the actuary's assumed discount rate.
D) A return on plan assets that is lower than expected.

E) B) and D)
F) None of the above

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Question 102

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The expected postretirement benefit obligation (EPBO) is the discounted present value of the total benefits expected to be paid by the employer to the plan participants.

A) True
B) False

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Question 103

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Louie Company has a defined benefit pension plan. On December 31 (the end of the fiscal year) , the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $10,000; interest cost, $8,000. The discount rate applied by the actuary was 8%. What was the service cost for the year?

On January 1, 2018,Gillock Climbing Academy instituted a defined benefit pension plan for its employees. The annual service cost for each year of 2018 and 2019 was $600,000. The interest rate used to determine the projected benefit obligation is 10%. Both the actual and the expected return on plan assets are 8% for both years. Gillock funded the plan in the amount of $400,000 each January 1, beginning on January 1, 2018. - What pension liability should Gillock report in its balance sheet for the year ended December 31, 2019?

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the most correct term. -Pension Benefit Guaranty Corp.

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

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

Which of the following is not a requirement for a qualified pension plan?

Eligibility requirements and the nature of benefits for postretirement health care plans usually are specified in the:

Assume that at the beginning of the current year, a company has a net gain-AOCI of $60,000,000. At the same time, assume the PBO and the plan assets are $300,000,000 and $450,000,000, 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?

The following data are available pertaining to Firewall Corporation's retiree health plan for 2018: Required: 1) What is the APBO at the beginning of 2018? 2) What is the interest cost for 2018? 3) What is service cost for 2018? 4) Prepare the journal entry to record the postretirement benefit expense for 2018.

Listed below are six terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the most correct term. -EPBO

Dharma Initiative, Inc, has a defined benefit pension plan. Characteristics of the plan during 2018 are as follows: The expected long-term rate of return on plan assets was 8%. There were no AOCI balances related to pensions on January 1, 2018, but at the end of 2018, the company amended the pension formula creating a prior service cost of $24 million. Required: 1. Calculate the pension expense for 2018. 2. Prepare the journal entry to record pension expense, gains or losses, past service cost, funding, and payment of benefits for 2018. 3. What amount will Dharma Initiative report in its 2018 balance sheet as a net pension asset or net pension liability?

Which of the following is not a characteristic of a qualified pension plan?

The amortization of a net gain has what effect on pension expense?

Burrito Corporation has a defined benefit pension plan. Burrito received the following information for the current calendar year: $\begin{array} { | l | r | } \hline \text { Projected benefit obligation } & \\\hline \text { Balance, January 1 } & \$ 150,000,000 \\\hline \text { Service cost } & 25,000,000 \\\hline \text { nnterest cost } & 15,000,000 \\\hline \text { Benefits paid } & ( 12,000,000 ) \\\text { Balance, December } 31 & \$ 178,000,000 \\\hline \text { Plan assets } & \\\hline \text { Balance, January 1 } & \$ 90,000,000 \\\hline \text { Actual return on plan assets } & \mathbf { 1 1 , 0 0 0 , 0 0 0 } \\\hline \text { Contribution } & \mathbf { 2 3 , 0 0 0 , 0 0 0 } \\\hline \text { Benefits paid } & \underline { \mathbf { 1 2 } , 0000,000 ) } \\\text { Balance, December 31 } & \$ 112,000,000 \\\hline\end{array}$ The expected long-term return on plan assets is 10%. There were no other relevant data for the year. Required: 1) Determine Burrito's pension expense for the year. 2) Prepare the journal entries to record the pension expense and funding for the year.

The EPBO for a particular employee on January 1, 2018, 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 25 years with 5 of those years already served as of January 1, 2018. What is the APBO at December 31, 2018?

In a defined benefit pension plan, the journal entry to record pension expense will not include:

Actuary and trustee reports indicate the following changes in the PBO and plan assets of Sporting Industries during 2018: Required: 1) Determine Sporting's pension expense for 2018 and prepare the appropriate journal entries to record the expense as well as the cash contribution to plan assets. 2) Prepare the appropriate journal entries to record any 2018 gains and losses.

Which one of the following assumptions is needed to estimate both postretirement health care benefits and pension benefits?