Use of future salaries in its computation

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Reference no: EM13173287

Pensions and Postretirement Benefits

1. Alternative methods exist for the measurement of the pension obligation (liability). Which measure requires the use of future salaries in its computation?

a. Vested benefit obligation

b. Accumulated benefit obligation

c. Projected benefit obligation

d. Restructured benefit obligation

2. The computation of pension expense includes all the following except

a. service cost component measured using current salary levels.

b. interest on projected benefit obligation.

c. expected return on plan assets.

d. All of these are included in the computation.

3. A corporation has a defined-benefit plan. A pension liability will result at the end of the year if the

a. projected benefit obligation exceeds the fair value of the plan assets.

b. fair value of the plan assets exceeds the projected benefit obligation.

c. amount of employer contributions exceeds the pension expense.

d. amount of pension expense exceeds the amount of employer contributions.

4. When a company amends a pension plan, for accounting purposes, prior service costs should be

a. treated as a prior period adjustment because no future periods are benefited.

b. amortized in accordance with procedures used for income tax purposes.

c. recorded in other comprehensive income (PSC).

d. reported as an expense in the period the plan is amended.

5 Kraft, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2013.

Service cost $ 250,000

Contributions to the plan 220,000

Actual return on plan assets 180,000

Projected benefit obligation (beginning of year) 2,400,000

Fair value of plan assets (beginning of year) 1,600,000

The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2013 is

a. $250,000.

b. $310,000.

c. $330,000.

d. $490,000.

Reference no: EM13173287

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