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Exam 17: Pensions and Other Postretirement Benefits

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Question 1

Multiple Choice

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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. -Retiree benefits paid

A) Included in the calculation of pension expense.
B) Retirement benefits specified by formula.
C) Reduce(s) both the PBO and plan assets.
D) Protection for employee pension rights.
E) Reported as a shareholders' equity account.

F) C) and D)
G) A) and D)

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C

Question 2

Multiple Choice

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The following incomplete (columns have missing amounts) pension spreadsheet is for the current year for First Republic Corporation (FRC) . - What was the net pension asset/liability reported in the balance sheet at the end of the year?

A) Net pension asset of $50.
B) Net pension asset of $24.
C) Net pension liability of $50.
D) Net pension liability of $24.

E) A) and C)
F) All of the above

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Question 3

Multiple Choice

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In a defined benefit pension plan, the journal entry to record benefits paid to retired employees will include:

Discuss the accounting for postretirement benefits prior to 1993 and under current GAAP. What are the key differences?

How do U.S. GAAP and IFRS differ with regard to reporting prior service costs?

Prior service cost is included among OCI items in the statement of comprehensive income and thus subsequently becomes part of AOCI where it is amortized over the average remaining service period using

What is different about the expected postretirement benefit obligation and the accumulated postretirement benefit obligation?

The portion of the obligation that plan participants are entitled to receive regardless of their continued employment is called the:

Revenue and expense items and components of other comprehensive income can be reported in a single statement of comprehensive income using:

Persoff Industries International has a defined benefit pension plan. The company revised its estimate of future salary levels causing its defined benefit obligation to increase by $16 million. Also, Persoff's $25 million actual return on plan assets exceeded the 5% high-grade corporate bond rate times the $440 million plan assets. Persoff prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) . The company will:

On January 1, 2018, Tom's Transport Company's accumulated postretirement benefit obligation was $30,000,000. At the end of 2018, retiree benefits paid were $3,500,000. Service cost for 2018 is $6,000,000. At the end of 2018, there was no prior service cost or net gain or loss. Assumptions regarding the trend of future health care costs were revised at the end of 2018. This revision caused the actuary to revise downward the estimate of the APBO by $500,000. The appropriate discount rate was 6%. Required: Determine the amount of the accumulated postretirement benefit obligation at December 31, 2018.

The amount of cash paid annually for unfunded postretirement health benefit plans, assuming they are not independently insured, usually is equal to:

If no estimates are changed and there is no net loss or gain or prior service cost, which of the following amounts related to an unfunded postretirement benefit plan will not increase with each additional year of service before the full eligibility date?

The attribution period for postretirement benefits spans each year of service from the employee's date of hire to the employee's date of:

The following information pertains to Havana Corporation's defined benefit pension plan: $\begin{array}{lrr}\$ 111000 \mathrm{~s}) &2018 & 2019 \\&\text { Beginning } & \text { Beginning } \\&\text { Beginning } & \text { Beginning } \\\text { Projected benefit obligation } & \$(6,000) & \$(6,504) \\\text { Plan assets } & 5,760 & 6,336 \\\text { Prior service cost-AOCI } & 600 & 552\\\text { Net loss-AOCI }&720,786\end{array}$ At the end of 2018, Havana contributed $696 thousand to the pension fund and benefit payments of $624 thousand were made to retirees. The expected rate of return on plan assets was 10%, and the actuary's discount rate is 8%. There were no changes in actuarial estimates and assumptions regarding the PBO. -What is Havana's 2018 gain or loss on plan assets?

The amount of the vested benefit obligation is less than the projected benefit obligation and more than the accumulated benefit obligation.

At December 31, 2017, Mallory, Inc., reported in its balance sheet a net loss of $12 million related to its postretirement benefit plan. The actuary for Mallory at the end of 2018 increased her estimate of future health care costs. Mallory's entry to record the effect of this change will include:

A statement of comprehensive income does not include:

On January 1 of the current reporting year, Coda Company's projected benefit obligation was $30 million. During the year, pension benefits paid by the trustee were $4 million. Service cost was $10 million. Pension plan assets earned $5 million as expected. At the end of the year, there was no net gain or loss and no prior service cost. The actuary's discount rate was 10%. Required: Determine the amount of the projected benefit obligation at December 31.

There almost always is a balance sheet liability for plans of postretirement benefits other than pensions since very few of these plans are funded.