Acctg302 Quiz Chap.

20

Name:

1. The interest on the projected benefit obligation component of pension expense a. reflects the incremental borrowing rate of the employer. b. reflects the rates at which pension benefits could be effectively settled. c. is the same as the expected return on plan assets. d. may be stated implicitly or explicitly when reported.

2. A corporation has a defined-benefit plan. A pension liability will result at the end of the year if the a. projected benefit obligation exceeds the fair value of the plan assets. b. fair value of the plan assets exceeds the projected benefit obligation. c. amount of employer contributions exceeds the pension expense. d. amount of pension expense exceeds the amount of employer contributions.

3. When a company amends a pension plan, for accounting purposes, prior service costs should be a. treated as a prior period adjustment because no future periods are benefited. b. amortized in accordance with procedures used for income tax purposes. c. recorded in other comprehensive income (PSC). d. reported as an expense in the period the plan is amended.

4. Gains and losses that relate to the computation of pension expense should be a. recorded currently as an adjustment to pension expense in the period incurred. b. recorded currently and in the future by applying the corridor method which provides the amount to be amortized. c. amortized over a 15-year period. d. recorded only if a loss is determined.

5.

A net pension asset is reported when 1

a. the accumulated benefit obligation exceeds the fair value of pension plan assets. b. the accumulated benefit obligation exceeds the fair value of pension plan assets, but a prior service cost exists. c. pension plan assets at fair value exceed the accumulated benefit obligation. d. pension plan assets at fair value exceed the projected benefit obligation.

6. Kraft, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2011. Service cost Contributions to the plan Actual return on plan assets Projected benefit obligation (beginning of year) Market-related and fair value of plan assets (beginning of year) $ 200,000 220,000 180,000 2,400,000 1,600,000

The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2011 is a. $200,000. b. $260,000. c. $280,000. d. $440,000.

7.

Barton, Inc. received the following information from its pension plan trustee concerning the operation of the company's defined-benefit pension plan for the year ended December 31, 2011. January 1, 2011 Fair value of pension plan assets Projected benefit obligation Accumulated benefit obligation Accumulated OCI (Gains / Losses) $4,200,000 4,800,000 840,000 -0December 31, 2011 $4,500,000 5,160,000 1,020,000 (90,000)

The service cost component of pension expense for 2011 is $360,000 and the amortization of prior service cost due to an increase in benefits is $60,000. The settlement rate is 10% and the expected rate of return is 9%. What is the amount of pension expense for 2011? a. $360,000 b. $522,000 c. $531,000 2

d. $432,000

8. The following data are for the pension plan for the employees of Lockett Company. 1/1/2010 Accumulated benefit obligation Projected benefit obligation Plan assets (at fair value) AOCL net loss Settlement rate (for year) Expected rate of return (for year) $7,500,000 8,100,000 6,900,000 -012/31/2010 $7,800,000 8,400,000 9,000,000 1,440,000 10% 8% 12/31/2011 $10,200,000 11,100,000 9,900,000 1,500,000 9% 7%

Locketts contribution was $1,260,000 in 2011 and benefits paid were $1,125,000 in 2011. Lockett estimates that the average remaining service life is 15 years.

The actual return on plan assets in 2011 is a. $900,000. b. $765,000. c. $600,000. d. $465,000.

*** Use the following information for the next TWO questions *** On January 1, 2011, Newlin Co. has the following balances: Projected benefit obligation Fair value of plan assets $2,100,000 1,800,000

The settlement rate is 10%. Other data related to the pension plan for 2011 are: Service cost Amortization of prior service costs due to increase in benefits Contributions $180,000 60,000 300,000 3

Benefits paid Actual return on plan assets Amortization of net gain

105,000 237,000 18,000

9. The balance of the projected benefit obligation at December 31, 2011 is a. $2,685,000. b.$2,385,000. c. $2,355,000. d.$2,337,000.

10. The fair value of plan assets at December 31, 2011 is a. $2,430,000. b.$2,250,000. c. $2,232,000. d.$2,214,000. ****

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