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Exam 17: Pensions and Other Postretirement Benefits

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Question 1

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What was the actuary's interest (discount) rate?

A) 7%.
B) 8%.
C) 9%.
D) 10%.$49 / $700 = 7%

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

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Question 2

Multiple Choice

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Which of the following is not a way of measuring the pension obligation?

A) Accumulated benefit obligation.
B) Vested benefit obligation.
C) Retiree benefit obligation.
D) Projected benefit obligation.

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

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Question 3

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

Hall of Fame Co. has a defined benefit pension plan. Two alternative possibilities for pension-related data for the current calendar year are shown below: Required: 1) For each independent case, calculate amortization of the net loss or gain that should be included as a component of pension expense for the current year. 2) Determine the net loss or gain as of December 31 of the current year. $\begin{array}{lcc} & \text { Case 1 } & \text { Case 2 } \\\text { Net loss (gain), Jan. 1 } & \$(230,000) & \$ 210,000 \\\text { Loss (gain) on plan assets } & (6,000) & 2,000 \\\text { Loss (gain) on PBO } & 12,000 & (220,000) \\\text { ABO, Jan. 1 } & (1,500,000) & (1,350,000) \\\text { PBO, Jan. 1 } & (1,700,000) & (1,600,000) \\\text { Plan assets, Jan. 1 } & 2,000,000 & 1,450,000 \\\text { Average remaining service period } & & \\\quad \text { of active employees (years) } & 12 & 10\end{array}$

The pension expense includes periodic changes that occur:

What is the interest cost to be included in the current year's postretirement benefit expense?

Castillo Company has a defined benefit pension plan. At the end of the reporting year, the following data were available: beginning PBO, $75,000; service cost, $18,000; interest cost, $5,000; benefits paid for the year, $9,000; ending PBO, $89,000; the expected return on plan assets, $10,000; and cash deposited with pension trustee, $17,000. There were no other pension related costs. The journal entry to record the annual pension costs will include a credit to the PBO for:

The annual pension expense for what type of pension plan(s) is recorded by a journal entry that includes a debit to pension expense and a credit to a liability?

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 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.

A net gain or loss affects the pension expense only if it exceeds an amount equal to what percentage of the PBO or plan assets, whichever is higher?

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?

Eligibility for postretirement health care benefits usually is based on the employee's:

There almost always is a postretirement liability for postretirement benefit plans since very few are funded.

Pension expense is decreased by:

If a pension plan is underfunded, the company has a net loss-OCI.

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

What is the theoretical and practical trade-off when measuring the pension liability using the projected benefit obligation compared to the accumulated benefit obligation?

With respect to Ralph, what is Oregon's accumulated postretirement benefit obligation (APBO) at the end of 2009, rounded to the nearest dollar?

Consider the following: I. present value of vested benefits at present pay levels II) present value of non-vested benefits at present pay levels III) present value of additional benefits related to projected pay increases Which of the above constitutes the accumulated benefit obligation?

The following information relates to Hatami Company's defined benefit pension plan during the current reporting year: Required: Determine the balance of pension plan assets at fair value on December 31. $\begin{array} { l r } \text { Plan assets at fair value, January 1 } & \$ 600,000,000 \\\text { Expected return on plan assets } & 50,000,000 \\\text { Actual return on plan assets } & 40,000,000 \\\text { Contributions to the pension fund (end of year) } & 90,000,000 \\\text { Amortization of net loss } & 0 \\\text { Pension benefits paid (end of year) } & 32,000,000 \\\text { Pension expense } & 60,000,000\end{array}$