Question 1

Which of the following measures of benefit does the FASB require for pension computations?

Accepted Answer

A)  vested benefit obligation
B)  accumulated benefit obligation
C)  projected benefit obligation
D)  future benefit obligationE) All of the above
F) A) and B)

Question 2

To account for stock appreciation rights,a company records compensation expense and a related liability.

Accepted Answer

A) True 
 B)False

Question 3

Amortizing a net loss for pensions will ________.

Accepted Answer

A)  increase retained earnings and increase accumulated other comprehensive income
B)  increase retained earnings and decrease accumulated other comprehensive income
C)  decrease retained earnings and decrease accumulated other comprehensive income
D)  decrease retained earnings and increase accumulated other comprehensive incomeE) All of the above
F) B) and C)

Question 4

Under the corridor approach,a company only amortizes the net accumulated gain or loss when the beginning accumulated unamortized balance of the net gain or loss exceeds the corridor.

Accepted Answer

A) True 
 B)False

Question 5

If an unexpected forfeiture of options occurs under a stock option plan,the change in compensation is treated as ________.

Accepted Answer

A)  a change in estimate
B)  an adjustment to additional paid in capital
C)  an adjustment to deferred compensation
D)  a change in other comprehensive incomeE) All of the above
F) B) and C)

Question 6

Prior service cost is recognized as pension expense over a period of several years under US GAAP.

Accepted Answer

A) True 
 B)False

Question 7

Accountants must make a judgment about the probability of forfeiture in a stock-based compensation plan.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is true regarding equity classified awards?

Accepted Answer

A)  Compensation expense is modified when the fair value of the options changes.
B)  Deferred compensation expense is increased when when service is rendered.
C)  Employees will exercise options when they are out of the money.
D)  Contributed capital is a form of donated capital.E) A) and B)
F) None of the above

Question 9

What is the journal entry to record the exercise of 85% of the options during Year 4 when the market price of the stock was $10.

Accepted Answer

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

Question 10

Lawrence Company has a defined benefit pension plan.On December 31 of the current year (the end of the fiscal year) ,the actuary's report to the company contained the following information: Ending PBO,$115,000; benefits paid to retirees,$15,000; interest cost,$9,000.The discount rate applied be the actuary was 9%.What was service cost for the year?

Accepted Answer

A)  $6,000
B)  $21,000
C)  $24,000
D)  $30,000E) None of the above
F) A) and B)

Question 11

Which of the following statements regarding stock options is true?

Accepted Answer

A)  An employee will exercise a stock option only when the current market price of the stock is less than the option price.
B)  Unexercised options may be sold or transferred in the open market.
C)  Employee stock options are a restricted form of a call option.
D)  Companies expense stock-based compensation at the fair value of the stock on the expected date of exercise.E) A) and D)
F) A) and C)

Question 12

How is interest cost calculated for a defined benefit pension plan?

Accepted Answer

A)  Multiply the PBO by the discount rate.
B)  Multiply the ABO by the discount rate.
C)  Multiply the PBO by the expected return on the plan assets.
D)  Multiply the ABO by the expected return on the plan assets.E) B) and D)
F) A) and B)

Question 13

If a pension plan is underfunded,it means that the ________.

Accepted Answer

A)  ABO exceeds plan assets
B)  PBO is less than plan assets
C)  ABO is less than plan assets
D)  PBO exceeds plan assetsE) B) and C)
F) C) and D)

Question 14

Amortizing a net gain for pensions will ________.

Accepted Answer

A)  increase retained earnings and increase accumulated other comprehensive income
B)  increase retained earnings and decrease accumulated other comprehensive income
C)  decrease retained earnings and decrease accumulated other comprehensive income
D)  decrease retained earnings and increase accumulated other comprehensive incomeE) A) and B)
F) A) and C)

Question 15

If unexpected turnover in Year 2 caused Fields to estimate that 15% of the options would be forfeited,what amount of compensation expense should Fields recognize in Year 2?

Accepted Answer

A)  $0
B)  $210,000
C)  $300,000
D)  $600,000E) C) and D)
F) B) and D)

Question 16

The initial journal entry to record an equity-classified award increases stockholders' equity on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 17

On January 1,Year 1,Davenport Corporation granted an employee an option to purchase 10,000 of Davenport's $10 par common stock at $30 per share.The options became exercisable on December 31,Year 3,after the employee completed three years of service.The option was exercised on February 1,Year 4.The market prices of Davenport's stock were as follows: January 1,Year 1,$40; December 31,Year 3,$60; and February 1,Year 4,$55.An options pricing model estimated the value of the options at $12 each on the grant date.For Year 1,Davenportt should recognize compensation expense of ________.

Accepted Answer

A)  $0
B)  $40,000
C)  $100,000
D)  $120,000E) A) and C)
F) All of the above

Question 18

Interest cost will ________.

Accepted Answer

A)  increase pension expense and reduce plan assets
B)  increase the PBO and reduce plan assets
C)  increase the PBO and increase pension expense
D)  increase pension expense and reduce the return on plan assetsE) A) and D)
F) B) and D)

Question 19

Which of the following statements regarding disclosures for stock-based compensation plans is false?

Accepted Answer

A)  An entity is required to disclose the intrinsic values of outstanding stock and options granted.
B)  The effect on the stock-based compensation plans on the entity's cash flows must be disclosed.
C)  An entity must disclose information only for vested shares that are exercised and exercisable.
D)  An entity must provide a reconciliation of beginning and ending amounts for the number and weighted average exercise price of share options.E) A) and B)
F) All of the above

Question 20

The carrying value value of liability-classified awards are not adjusted for changes in fair value.

Accepted Answer

A) True 
 B)False

Exam 20: Accounting for Employee Compensation and Benefits

How is interest cost calculated for a defined benefit pension plan?

Correct Answer
verified

Accountants must make a judgment about the probability of forfeiture in a stock-based compensation plan.

Correct Answer
verified

Under the corridor approach,a company only amortizes the net accumulated gain or loss when the beginning accumulated unamortized balance of the net gain or loss exceeds the corridor.

Correct Answer
verified

Correct Answer
verified

Amortizing a net loss for pensions will ________.

Correct Answer
verified

The carrying value value of liability-classified awards are not adjusted for changes in fair value.

Correct Answer
verified

If an unexpected forfeiture of options occurs under a stock option plan,the change in compensation is treated as ________.

Correct Answer
verified

To account for stock appreciation rights,a company records compensation expense and a related liability.

Correct Answer
verified

What is the journal entry to record the exercise of 85% of the options during Year 4 when the market price of the stock was $10.

Correct Answer
verified

Which of the following statements regarding stock options is true?

Correct Answer
verified

Prior service cost is recognized as pension expense over a period of several years under US GAAP.

Correct Answer
verified

Which of the following statements regarding disclosures for stock-based compensation plans is false?

Correct Answer
verified

Which of the following measures of benefit does the FASB require for pension computations?

Correct Answer
verified

The initial journal entry to record an equity-classified award increases stockholders' equity on the balance sheet.

Correct Answer
verified

Interest cost will ________.

Correct Answer
verified

If unexpected turnover in Year 2 caused Fields to estimate that 15% of the options would be forfeited,what amount of compensation expense should Fields recognize in Year 2?

Correct Answer
verified

Correct Answer
verified

Which of the following statements is true regarding equity classified awards?

Correct Answer
verified

Amortizing a net gain for pensions will ________.

Correct Answer
verified

If a pension plan is underfunded,it means that the ________.

Correct Answer
verified

Exam 20: Accounting for Employee Compensation and Benefits

How is interest cost calculated for a defined benefit pension plan?

Correct AnswerverifiedShow Answer

Accountants must make a judgment about the probability of forfeiture in a stock-based compensation plan.

Correct AnswerverifiedShow Answer

Under the corridor approach,a company only amortizes the net accumulated gain or loss when the beginning accumulated unamortized balance of the net gain or loss exceeds the corridor.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Amortizing a net loss for pensions will ________.

Correct AnswerverifiedShow Answer

The carrying value value of liability-classified awards are not adjusted for changes in fair value.

Correct AnswerverifiedShow Answer

If an unexpected forfeiture of options occurs under a stock option plan,the change in compensation is treated as ________.

Correct AnswerverifiedShow Answer

To account for stock appreciation rights,a company records compensation expense and a related liability.

Correct AnswerverifiedShow Answer

What is the journal entry to record the exercise of 85% of the options during Year 4 when the market price of the stock was $10.

Correct AnswerverifiedShow Answer

Which of the following statements regarding stock options is true?

Correct AnswerverifiedShow Answer

Prior service cost is recognized as pension expense over a period of several years under US GAAP.

Correct AnswerverifiedShow Answer

Which of the following statements regarding disclosures for stock-based compensation plans is false?

Correct AnswerverifiedShow Answer

Which of the following measures of benefit does the FASB require for pension computations?

Correct AnswerverifiedShow Answer

The initial journal entry to record an equity-classified award increases stockholders' equity on the balance sheet.

Correct AnswerverifiedShow Answer

Interest cost will ________.

Correct AnswerverifiedShow Answer

If unexpected turnover in Year 2 caused Fields to estimate that 15% of the options would be forfeited,what amount of compensation expense should Fields recognize in Year 2?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is true regarding equity classified awards?

Correct AnswerverifiedShow Answer

Amortizing a net gain for pensions will ________.

Correct AnswerverifiedShow Answer

If a pension plan is underfunded,it means that the ________.

Correct AnswerverifiedShow Answer

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