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Practice Quiz Chapter 20: IA
Terms in this set (15)
Which of the following statements is true about postretirement health care benefits?
The beneficiary is the retiree, spouse, and other dependents
When a company adopts a pension plan, prior service costs should be charged to
Other comprehensive income (PSC).
The following information for Cooper Enterprises is given below:
Assets and Obligations December 31, 2013
Plan assets at FV 200,000
Accumulated benefit obligation 370,000
Projected benefit obligation 400,000
Pension asset/liab, Jan 2, 2013 10,000
Accumulated other comprehensive loss 167,900
There were no actuarial gains or losses at January 1, 2013. The average remaining service life of employees is 10 years.
What is the pension expense that Cooper Enterprises should report for 2013?
($200,000 + $120,000 - $167,900) = $152,100.
The projected benefit obligation is the measure of pension obligation that
is required to be used for reporting the service cost component of pension expense
The following information relates to Jackson, Inc.:
For the Year End Dec 31
Plan assets fv $1,310,000.00 $1,824,000.00
pension expense $570,000.00 $450,000.00
projected benefit obligation $1,620,000.00 $1,984,000.00
annual contr plan $600,000.00 $450,000.00
accumulated OCI (PSC) $480,000.00 $420,000.00
The amount reported as the liability for pensions on the December 31, 2012 balance sheet is
($1,620,000 - $1,310,000) = $310,000
The relationship between the amount funded and the amount reported for pension expense is as follows
pension expense may be greater than, equal to, or less than the amount funded
Logan Corp., a company whose stock is publicly traded, provides a noncontributory defined-benefit pension plan for its employees. The company's actuary has provided the following information for the year ended December 31, 2013:
projected benefit obligation $650,000.00
accumulated benefit obligation $525,000.00
fv of plan assets $825,000.00
service cost $240,000.00
interest on projected benfit obligation $24,000.00
amortization of prior service cost $60,000.00
expected and actual return on plan assets $82,500.00
The market-related asset value equals the fair value of plan assets. No contributions have been made for 2013 pension cost. In its December 31, 2013 balance sheet, Logan should report a pension asset / liability of
($825,000 - $650,000) = $175,000.
On January 1, 2013, Newlin Co. has the following balances:
projected benefit obligation $2,100,000.00
fv of plan assets $1,800,000.00
The settlement rate is 10%. Other data related to the pension pair are
service cost $180,000.00
amortization of prior service cost $60,000.00
benefits paid $155,000.00
actual return on plan assets $237,000.00
amortization of net gain $18,000.00
The fair value of plan assets at December 31, 2013 is
($1,800,000 + $237,000 + $300,000 - $155,000) = $2,182,000.
Rathke, Inc. has a defined-benefit pension plan covering its 50 employees. Rathke agrees to amend its pension benefits. As a result, the projected benefit obligation increased by $1,800,000. Rathke determined that all its employees are expected to receive benefits under the plan over the next 5 years. In addition, 20% are expected to retire or quit each year. Assuming that Rathke uses the years-of-service method of amortization for prior service cost, the amount reported as amortization of prior service cost in year one after the amendment is
(50 + 40 + 30 + 20 + 10 = 150.
$1,800,000 ÷ 150 = $12,000/service yr.
$12,000 × 50) = $600,000
The following information relates to the pension plan for the employees of Turner Co.:
1/1/2012 12/31/2012 12/31/2013
Accum benefit obli $2,640,000.00 $2,760,000.00 $3,600,000.00
Projected benefit obl$2,790,000.00 $2,988,000.0 $4,002,000.00
FV of plan assets $2,550,000.00 $3,120,000.00 $3,444,000.00
AOCI - net (gain) or loss $- $(432,000.00) $(480,000.00)
Settlement rate for the year 11% 11%
Expected rate of return 8% 7%
Turner estimates that the average remaining service life is 16 years. Turner's contribution was $378,000 in 2013 and benefits paid were $282,000.
The actual return on plan assets in 2013 is
($3,444,000 - $3,120,000) - ($378,000 - $282,000) = $228,000.
Presented below is pension information related to Waters Company as of December 31, 2013:
Accum benefit obligation $3,000,000.00
Projected benefit obligation $3,500,000.00
FV of plan assets $3,700,000.00
AOCI - net (gain) or loss $100,000.00
The amount to be reported as Pension Asset / Liability as of December 31, 2013 is
($3,700,000 - $3,500,000) = $200,000 pension asset
The following information pertains to Hopson Co.'s pension plan:
Actuarial estimate of projected
benefit obligation 1/1/13 $72,000.00
Assumed discount rate 10%
Service costs for 2013 $28,000.00
Pension benefits paid during
If no change in actuarial estimates occurred during 2013, Hopson's projected benefit obligation at December 31, 2013 was
($72,000 + $28,000 + ($72,000 × .10) - $15,000) = $92,200.
Presented below is pension information related to Woods, Inc. for the year 2013:
Service cost $92,000.00
interes on projected benefit obl $54,000.00
intrest on vested benefits 24000
Amoritzation of prior service
cost due to increase in benefits $12,000.00
Expected return on plant assets $18,000.00
The amount of pension expense to be reported for 2013 is
($92,000 + $54,000 + $12,000 - $18,000) = $140,000.
A corporation has a defined-benefit plan. A pension liability will result at the end of the year if the
projected benefit obligation exceeds the fair value of the plan assets
The actuarial gains or losses that result from changes in the projected benefit obligation are called
Gain and Losses Gain and losses
a yes yes
b no no
c yes no
d no yes
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