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Exam 17: Pensions and Other Postretirement Benefits

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Question 41

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The amount of the vested benefit obligation is lower than the projected benefit obligation and greater than the accumulated benefit obligation.

A) True
B) False

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Question 42

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The following information relates to Schmidt Sausage Co.'s defined benefit pension plan during the current reporting year: Required: Determine the amount of pension plan assets at fair value on December 31. $\begin{array} { l c } & \text { (\$ in millions) }\\\text { Plan assets beginning of the year } & \$ 400 \\\text { Expected return on plan assets }& 40 \\\text { Actual return on plan assets } & 32 \\\text { Cash contributions } & 60\\\text { Amortization of net loss } & 8 \\\text { Retiree benefits }& 9\\\end{array}$

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Question 43

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What is the 2009 pension expense for Havana's plan?

The expected postretirement benefit obligation is the discounted present value of the total benefits expected to be paid by the employer to the plan participants.

The following information is related to the defined benefit pension plan of Dreamworld Company for the year: Assuming no other relevant data exist, what is the pension expense for the year?

Which of the following statements typifies defined contribution plans?

Pension plans typically require some minimum period of employment before benefits vest. What is the 1974 federal law governing vesting (as well as other aspects of pensions)? What are the vesting rules?

The amortization of a net gain has what effect on pension expense?

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

Brown Industries provides postretirement health care benefits to employees. On January 1 of the current calendar year, the following data were available. Management amortizes prior service cost on a straight-line basis. The interest rate is 10%. Service cost for the current year is $95,000. Required: 1) Calculate the prior service cost amortization for the current year. 2) Calculate the postretirement benefit expense for the current year. 3) Prepare the entry to record the postretirement benefit expense for the current year. $\begin{array}{lr}\text { Prior service cost } & \$ 50,000 \\\text { APBO } & \$ 480,000 \\\text { Fair value of plan assets } & \text { none } \\\text { Average remaining service period to retirement } & 25 \text { years } \\\text { Average remaining service period to full eligibility } & 20 \text { years }\end{array}$

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

What is Havana's 2009 gain or loss on plan assets?

The key elements of a defined benefit pension plan include all of the following except:

An underfunded pension plan means that the:

Bazerman Inc. has a postretirement health care benefit plan. On January 1 of the current calendar year, the following plan-related data were available. The rate of return on plan assets during the year was 12%. The expected return was 10%. The actuary revised assumptions regarding the APBO at the end of the year, resulting in a $42,000 increase in the estimate of the obligation. Required: 1) Calculate any amortization of net loss that should be included as a component of postretirement benefit expense for the current year. 2) Determine the net loss or gain as of December 31 of the current year. $\begin{array} { l r } \text { Net loss-postretirement benefit plan } & \$ 244,000 \\\text { Accumulated postretirement benefit obligation } & \$ 2,200,000 \\\text { Fair value of plan assets } & \$ 450,000 \\\text { Average remaining service period to retirement } & 12 \text { years } \\\text { Average remaining service period to full eligibility } & 10 \text { years }\end{array}$

Suppan Service began the year with a net pension liability of $56 million (underfunded pension plan). Pension expense for the year included the following ($ in millions): service cost, $20; interest cost, $12; expected return on assets, $8; amortization of net gain, $4. Required: Prepare the appropriate general journal entry to record Suppan's pension expense.

Scallion Company received the following reports on its defined benefit pension plan for the current calendar year: The long-term expected rate of return on plan assets is 10%. Assuming no other data are relevant, what is the pension expense for the year?

Amortizing prior service cost for pension plans will:

The Top Foods has an underfunded pension plan. The pension expense is $58 million. This amount includes a $60 million service cost, a $40 million interest cost, a $45 million reduction for the expected return on plan assets, and a $3 million amortization of a prior service cost. Required: Prepare the appropriate journal entries to record Top's pension expense.

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