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Exam 17: Pensions and Other Postretirement Benefits

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Question 51

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The postretirement benefit obligation is the:

A) Future value of the estimated benefits during retirement.
B) Present value of the estimated benefits during retirement.
C) Fair value of the estimated benefits during retirement.
D) Actual value of estimated benefits during retirement.

E) A) and B)
F) B) and C)

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Question 52

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Differentiate between the projected benefit obligation, the accumulated benefit obligation, and the vested benefit obligation.

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The accumulated benefit obligation is th...

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Question 53

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Which of the following describes defined benefit pension plans?

What are the five components of postretirement benefit expense?

Burrito Corporation has a defined benefit pension plan. Burrito received the following information for the current calendar year: The expected long-term return on plan assets is 10%. There were no other relevant data for the year. Required: 1) Determine Burrito's pension expense for the year. 2) Prepare the journal entries to record the pension expense and funding for the year. $\begin{array}{lr}\text { Projected benefit obligation } & \\\text { Balance, January 1 } & \$ 150,000,000 \\\text { Service cost } & 25,000,000 \\\text { Interest cost } & 15,000,000 \\\text { Benefits paid } & (12,000,000) \\\text { Balance, December 31 } & \$ 178,000,000 \\\text { Plan assets } & \\\text { Balance, January 1 } & \$ 90,000,000 \\\text { Actual return on plan assets } & 11,000,000 \\\text { Contribution } & 23,000,000 \\\text { Benefits paid } & (12,000,000) \\\text { Balance, December 31 } & \$ 112,000,000\end{array}$

Explain how the loss is reported in the financial statements (other than the balance sheet).

What is the present value of Ralph's net benefits as of his expected retirement date, rounded to the nearest dollar?

The net postretirement benefit liability (APBO minus plan assets) is increased by:

Amortizing prior service cost for pensions and other postretirement benefit plans will:

At December 31, 2008, Mongo, Inc. reported in its balance sheet a net loss of $3 million related to its pension plan. The actuary for Mongo at the end of 2009 increased her estimate of future salary levels. Mongo's entry to record the effect of this change will include:

Pension data for Goldman Company included the following for the current calendar year: Required: Determine pension expense for the year. $\begin{array} { l r } \text { Service cost } & \$ 100,000 \\\text { PBO, January 1 } & 750,000 \\\text { Plan assets, January 1 } & 800,000 \\\text { Amortization of prior service cost } & 6,000 \\\text { Amortization of net loss } & 2,000 \\\text { Discount rate, } 8 \% & \\\text { Expected return on plan assets, } 10 \% & \\\text { Actual return on plan assets, } 12 \% &\end{array}$

What was the net pension asset / liability reported in the balance sheet at the end of the year?

Assume that at the beginning of the current year, a company has a net gain-AOCI of $60,000,000. At the same time, assume the PBO and the plan assets are $300,000,000 and $450,000,000, respectively. The average remaining service period for the employees expected to receive benefits is 10 years. What is the amount of amortization to pension expense for the year?

Vrable Corporation has a defined benefit pension plan. Two alternative possibilities for pension-related data for the current calendar year are shown below: Required: 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. $\begin{array}{lrr} &{\text { Case 1 }} &{\text { Case 2 }} \\\text { Net loss (gain), Jan. 1 } & \$ 240,000 & \$(230,000) \\\text { Loss (gain) on plan assets } & (8,000) & (6,000) \\\text { Loss (gain) on PBO } & (17,000) & 12,000 \\\text { ABO, Jan. 1 } & (1,900,000) & (1,500,000) \\\text { PBO, Jan. 1 } & (2,500,000) & (1,700,000)\\\text { Plan assets, Jan } 1&2,100,000&2,000,000\\\text { Average remaining service period }\\\text { of active employees (years) }&10&12\end{array}$

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 vested benefit obligation?

What was FRC's pension expense for the year?

A net gain or net loss affects pension expense only if it exceeds ten percent of the pension benefit obligation or ten percent of plan assets, whichever is lower.

Accounting for postretirement health care benefits is similar, in most respects, to accounting for:

Payment of retirement benefits:

Prior to 1993, postretirement benefits other than pensions generally were accounted for on the: