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Exam 17: Pensions and Other Postretirement Benefits

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Question 81

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The projected benefit obligation may be less reliable than the accumulated benefit obligation.

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B) False

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Question 82

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Patey Technologies calculated pension expense for its underfunded pension plan as follows: Required: What is the effect of the components of pension expense on Patey's statement of comprehensive income? $\begin{array}{lc}& \text { (\$ in millions) } \\\text { Service cost } & \$ 672 \\\text { Interest cost } & 450 \\\text { Expected retum on the plan assets (\$300 actual, less \$30 gain) } & (270) \\\text { Amortization of prior service cost } & 24 \\\text { Amortization of net loss } & 6\\\text { Pension expense }&\$882\end{array}$

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Gains and losses (either from changing a...

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Question 83

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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:

The following information is related to the defined benefit pension plan of Simpson Company for the year: Assuming no other relevant data exists, what is the pension expense for the year?

Interest cost will:

Pension data for Matta Corporation include the following for the current calendar year: Required: Assuming no change in actuarial assumptions and estimates, determine the service cost component of pension expense for the current year. $\begin{array}{lr}&\text { ( } \$ \text { in millions) }\\\text { Discount rate, } 10 \%\\\text { PBO, January 1 } & \$ 360 \\\text { PBO, December 31 } & 450 \\\text { ABO, January 1 } & 200 \\\text { ABO, December 31 } & 275 \\\text { Cash contributions to pension fund, December 31 } & 100 \\\text { Benefit payments to retirees, December 31 } & 54\end{array}$

Which of the following is not included among the assumptions needed to estimate postretirement health care benefits?

Fox Company received the following reports on its defined benefit pension plan for the current calendar year: The long-term expected rate of return on plan assets is 8%. Assuming no other data are relevant, what is the pension expense for the year?

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

The components of postretirement benefit expense are similar to the components of pension expense. How does the service cost component differ between the two expenses?

Discuss the accounting for postretirement benefits prior to 1993 and under SFAS No. 106. What are the key differences?

Data pertaining to the postretirement health care benefit plan of Amazing Delivery Service include the following for the current calendar year. Required: 1) Determine Amazing's postretirement benefit expense for the current year. 2) Prepare the journal entry to record the benefit expense for the current year. $\begin{array} { l r } \text { Service cost } & \$ 100,000 \\\text { APBO, January 1 } & \$ 600,000 \\\text { Plan assets (fair value), January 1 } & \$ 40,000 \\\text { Prior service cost } & \text { none } \\\text { Retiree benefits paid (end of year) } & \$ 75,000 \\\text { Net gain, (current year amortization, \$500) } & \$ 82,000 \\\text { Contribution to health care fund (end of year) } & \$ 172,000 \\\text { Return on plan assets (actual and expected) } & 10 \% \\\text { Discount rate } & 7 \%\end{array}$

Which of the following is a correct statement concerning the reporting of the pension plan on the face of the employer's balance sheet?

In a postretirement health care plan, prior service cost is attributed to the service of active employees from the date of the amendment to:

The EPBO for a particular employee on January 1, 2009, was $30,000. The APBO at the beginning of the year was $6,000. The appropriate discount rate for this postretirement plan is 5%. The employee is expected to serve the company for a total of twenty-five years with five of those years already served as of January 1, 2009. What is the APBO at December 31, 2009?

What is the 2009 service cost for Havana's plan?

With respect to Ralph, what is the interest cost to be included in Oregon's 2010 postretirement benefit expense, rounded to the nearest dollar?

Discuss the key quantitative elements of accounting for a defined benefit pension plan.

How do retiree health benefits differ from pension benefits with respect to accounting, funding, regulation, and employee benefits?

Bernard Corporation has an unfunded postretirement health care benefit plan. Life insurance and medical care benefits are provided to employees who render 12 years of service and attain age 55 while in service to the company. At the end of 2009, Teri Clark is 35. She was hired by Bernard five years ago at age 30 and is expected to retire at the age of 62. The expected postretirement benefit obligation for Teri is $50,000 at the end of 2009 and $60,000 at the end of 2010. Required: Calculate the accumulated postretirement benefit obligation at the end of 2009 and 2010 and the service cost for 2009 and 2010 pertaining to Teri.