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Exam 17: Pensions and Other Postretirement Benefits

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Question 61

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Crystal Company has an unfunded retiree health care plan. Each of the company's four employees has been with the organization since its inception at the beginning of 2012. As of the end of 2013, the actuary estimates the total net cost of providing benefits to employees during their retirement years to have a present value of $196,000. Each of the employees will become fully eligible for benefits after 28 more years of service, but aren't expected to retire for 30 more years. The interest rate is 8%. Required: 1) What is the expected postretirement benefit obligation at the end of 2013? 2) What is the accumulated postretirement benefit obligation at the end of 2013? 3) What is the expected postretirement benefit obligation at the end of 2014? 4) What is the accumulated postretirement benefit obligation at the end of 2014?

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1) $196,000 EPBO at the end of 2013 (giv...

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Question 62

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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.

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Question 63

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Conceptually, the service method provides a better matching of costs and benefits in amortizing prior service cost than does the straight-line method.

The EPBO for a particular employee on January 1, 2013, was $150,000. The APBO at the beginning of the year was $30,000. The appropriate discount rate for this postretirement plan is 5%. The employee is expected to serve the company for a total of 25 years with 5 of those years already served as of January 1, 2013. What is the APBO at December 31, 2013?

At December 31, 2012, 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 2013 increased her estimate of future salary levels. Mongo's entry to record the effect of this change will include:

To help assess the uncertainties that surround a defined benefit pension plan, corporations frequently hire a(n) :

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

Interest cost is calculated by multiplying the:

JL Health Services reported a net loss-AOCI in last year's balance sheet. This year, the company revised its estimate of future salary levels causing its PBO estimate to decline by $24. Also, the $48 million actual return on plan assets was less than the $54 million expected return. As a result:

Which of the following is not usually part of the pension formula under a defined benefit plan?

What is the 2013 service cost for Havana's plan?

Which of the following is not a requirement for a qualified pension plan?

What is OTC's pension expense for the year?

Carpenter Gems began the year with a net pension liability of $84 million (underfunded pension plan). Pension expense for the year included the following ($ in millions): service cost, $30; interest cost, $18; expected return on assets, $12; amortization of net loss, $6. Required: Prepare the appropriate general journal entry to record Carpenter's pension expense.

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.

An underfunded pension plan means that the:

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?

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

Assume that at the beginning of the current year, a company has a net gain-AOCI of $25,000,000. At the same time, assume the PBO and the plan assets are $200,000,000 and $150,000,000, 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?

Orpheum Productions has a noncontributory, defined benefit pension plan. On December 31, 2013 (the end of Orpheum's fiscal year), the following pension-related data were available: Required: 1) Prepare the 2013 journal entry to record pension expense. 2) Prepare the 2013 journal entry to record the contribution to plan assets. 3) Prepare the journal entries to record any 2013 gains and losses.