Question :
51. The liability of the pension plan equals the A. future value : 1230341
51. The liability of the pension plan equals the
A. future value of the expected amounts payable to employees.
B. present value of the expected amounts payable to employees.
C. expected future amounts payable to employees.
D. current amounts payable to employees during the next year or operating cycle.
E. employees’ current benefits.
52. The discount rate that firms use in measuring the pension plan liability is the rate of return on
A. high-quality equity investments.
B. low-quality fixed-income investments with a maturity approximately equal to the period to maturity of the pension benefits.
C. average-quality fixed-income investments with a maturity approximately equal to the period to maturity of the pension benefits.
D. high-quality fixed-income investments with a maturity approximately equal to the period to maturity of the pension benefits.
E. certificates of deposit with a maturity approximately equal to the period to maturity of the pension benefits.
53. The typical benefit formula for a defined benefit plan takes into account the employee’s
A. length of service , only.
B. salary, only.
C. length of service and salary.
D. marital status, only.
E. length of service, salary, and marital status.
54. U.S. GAAP defines the primary measurement of the pension liability of the pension plan as the _____the _____ of the amount the pension plan expects to pay to employees during retirement based on accumulated service but using the level of salary expected to serve as a basis for computing pension benefits.
A. projected benefit obligation; future value
B. projected benefit obligation; present value
C. actual benefit obligation; present value
D. actual benefit obligation; future value
E. actual benefit obligation; expected value
55. U.S. GAAP and IFRS require firms to base both pension expense and funded status on the Projected Benefit Obligation (PBO). The liability of the pension plan usually changes each period as follows: PBO at End of the Period =
A. PBO at Beginning of the Period
+ Increase in PBO for Interest
+ Increase in PBO for Current Employee Service (service cost)
+/- Actuarial Gains and Losses
+ Payments to Retirees
B. PBO at Beginning of the Period
+ Increase in PBO for Interest
+ Increase in PBO for Current Employee Service (service cost)
+/- Actuarial Gains and Losses
– Payments to Retirees
C. PBO at Beginning of the Period
– Increase in PBO for Interest
– Increase in PBO for Current Employee Service (service cost)
+/- Actuarial Gains and Losses
+ Payments to Retirees
D. PBO at Beginning of the Period
– Increase in PBO for Interest
+ Increase in PBO for Current Employee Service (service cost)
+/- Actuarial Gains and Losses
– Payments to Retirees
E. PBO at Beginning of the Period
+ Increase in PBO for Interest
– Increase in PBO for Current Employee Service (service cost)
+/- Actuarial Gains and Losses
– Payments to Retirees
56. U.S. GAAP treatment of a defined benefit pension plan requires employers to recognize the funded status as _____, if the pension plan(s) is/are overfunded and _____, if the pension plan(s) is/are underfunded, and an adjustment to Other Comprehensive Income, a shareholders’ equity account that is _____, for the offsetting amount.
A. an asset; a liability; not part of net income
B. an asset; a liability; part of net income
C. a liability; an asset; not part of net income
D. a liability; an asset; part of net income
E. none of the above
57. U.S. GAAP treatment of a defined benefit pension plan requires employers to recognize the funded status as
A. an asset, if the pension plan(s) is/are overfunded.
B. a liability, if the pension plan(s) is/are underfunded.
C. both an asset [for the net overfunded plan(s)] and a liability [for the net underfunded plan(s)].
D. an adjustment to Other Comprehensive Income, a shareholders’ equity account that is not part of net income, for the offsetting amount.
E. all of the above
58. Which of the following is true regarding the accounting for defined contribution plans?
A. When pension assets equal pension liabilities and the expected rate of return on pension investments equals the discount rate used to compute the projected benefit obligation, the amounts offset each other.
B. When the interest cost exceeds the expected return on pension investments, either employer contributions or future earnings on pension plan investments must make up the difference.
C. Computing pension expense (or credit) using the expected return (not the actual return) rests on the view that pension plans should take a long-term perspective and generate earnings from investments based on a long-term expected rate of return.
D. Annual deviations from the long-term expected rate of return should not flow through to net income as they occur.
E. all of the above
59. Which of the following is not true regarding the accounting for defined contribution plans?
A. When pension assets equal pension liabilities and the expected rate of return on pension investments equals the discount rate used to compute the projected benefit obligation, the amounts offset each other.
B. When the interest cost exceeds the expected return on pension investments, either employer contributions or future earnings on pension plan investments must make up the difference.
C. Computing pension expense (or credit) using the expected return (not the actual return) rests on the view that pension plans should take a long-term perspective and generate earnings from investments based on a long-term expected rate of return.
D. Annual deviations from the long-term expected rate of return should flow through to net income as they occur.
E. Recognizing service cost as an increase in the pension expense parallels inclusion of wage and salary costs as an expense.
60. Both the regulatory treatment and the tax treatment of employer contributions
A. to postretirement benefit arrangements, including pensions, are jurisdiction-specific.
B. differ substantially between postretirement health plans and defined benefit pension plans.
C. create stronger incentives to contribute to the defined benefit pension plans than to postretirement health plans.
D. all of the above
E. none of the above
