CHAP017 - Chapter 17 Pensions and Other Postretirement...

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Unformatted text preview: Chapter 17 Pensions and Other Postretirement Benefits True/False Questions 1. The amount of the vested benefit obligation is lower than the projected benefit obligation and greater than the accumulated benefit obligation. Answer: False Learning Objective: 2 Level of Learning: 2 2. The projected benefit obligation may be less reliable than the accumulated benefit obligation. Answer: True Learning Objective: 2 Level of Learning: 1 3. An upward revision of inflation and compensation trends would likely cause a gain in the pension benefit obligation. Answer: False Learning Objective: 3 Level of Learning: 2 4. Prior service cost is recognized as pension expense over a period of several years. Answer: True Learning Objective: 3 Level of Learning: 1 5. Conceptually, the service method provides a better matching of costs and benefits in amortizing prior service cost than does the straight-line method. Answer: True Learning Objective: 3 Level of Learning: 1 6. 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. Answer: False Learning Objective: 3 Level of Learning: 1 7. Pension expense and funding amounts are both accounting decisions. Answer: False Learning Objective: 5 Level of Learning: 1 8. The balance of prepaid or accrued pension cost expense is a combination of the funded status of the plan, the unamortized prior service cost, and the unamortized net gain or loss. Answer: True Learning Objective: 5 Level of Learning: 1 9. The minimum pension liability is the excess of the projected benefit obligation over the plan assets. Answer: False Learning Objective: 7 Level of Learning: 1 10. If a pension plan is underfunded, an additional liability must always be recorded. Answer: False Learning Objective: 6 Level of Learning: 2 11. Unlike pensions, there is almost always an accrued liability for postretirement benefit plans since very few are funded. Answer: True Learning Objective: 8 Level of Learning: 1 Spiceland/Sepe/Tomassini, Intermediate Accounting, Fourth Edition 181 Chapter 17 Pensions and Other Postretirement Benefits 12. 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. Answer: True Learning Objective: 9 Level of Learning: 1 Matching Pair Questions Use the following to answer questions 13-17: 13-17. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term by placing the letter designating the best term in the space provided by the phrase. Terms: A. Additional liability B. Contribution to pension-fund C. Contributory pension plan D. Gain or loss on PBO E. Minimum pension liability adjustment F. Noncontributory pension plan G. Pension expense H. Prior service cost I. Service method J. Straight-line method Phrases: 13. ____ A contra equity account. ____ A contra equity account....
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This note was uploaded on 03/22/2011 for the course BUS 3000 taught by Professor None during the Spring '11 term at Texas Woman's University.

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CHAP017 - Chapter 17 Pensions and Other Postretirement...

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