Question :
61. Which of the following is/are true regarding the accounting for : 1245713
61. Which of the following is/are 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
62. 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.
63. 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
64. Some employers specify the benefit that employees will receive during retirement. The employer must contribute sufficient amounts to the pension plan so that those contributions plus earnings from investments made with those contributions will be sufficient to pay the specified benefit. Such plans are referred to as
A. defined benefit pension plans.
B. defined contribution pension plans.
C. deferred compensation plans.
D. 529 Plans.
E. individual retirement accounts.
65. Some employers promise to contribute a certain amount to the pension plan each period for each employee, usually based on an employee’s salary, without specifying the benefits the employee will receive during retirement. The amounts employees eventually receive depend on the investment performance of the pension plan. Such plans are referred to as
A. defined benefit pension plans.
B. defined contribution pension plans.
C. deferred compensation plans.
D. 529 Plans.
E. individual retirement accounts.
66. Downy Airlines discloses the funded status of pension plans and the health and life insurance plans for two recent years. Both the pension plan and other benefit plans are underfunded. The underfunded amounts for these plans appear in
A. current assets and noncurrent assets on the balance sheet.
B. current liabilities and noncurrent liabilities on the balance sheet.
C. shareholders’ equity on the balance sheet.
D. revenue on the income statement.
E. expenses on the income statement.
67. Downy Airlines discloses the funded status of pension plans and the health and life insurance plans for two recent years. Both the pension plan and other benefit plans are underfunded. The amounts that Downy includes in _____, _____, represent unamortized prior service costs and net actuarial losses.
A. Other Comprehensive Income; a revenue account
B. Accumulated Other Comprehensive Income; a shareholders’ equity account
C. Other Comprehensive Income; an asset account
D. Accumulated Other Comprehensive Income; a liability account
E. Other Comprehensive Income; a shareholders’ equity account
68. Income tax expense affects assessments of profitability as much as any other expense. A common ratio for analyzing the effect of income taxes on profitability is the _____ rate, equal to income tax expense divided by financial reporting income before income taxes:
A. marginal tax
B. effective tax
C. tax burden
D. statutory
E. average
69. What equals the income tax expense divided by financial reporting income before income taxes?
A. marginal tax rate
B. effective tax rate
C. tax burden rate
D. statutory rate
E. average tax rate
70. Permanent differences between pretax book income and taxable income arises from
A. tax-exempt interest revenue, only.
B. certain fines, only.
C. depreciation on long-lived assets, only.
D. bad debt expense, only.
E. tax-exempt interest revenue and certain fines.
