accounting for pensions and postretirement benefits ch20.pdf

8/14/2019 ACCOUNTING FOR PENSIONS AND POSTRETIREMENT BENEFITS ch20.pdf

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ccounting for )ensions and )ostretire!ent 9enefits

MU)TIP)E CHOICE*Con%e&tua ,%ont'-

Ans+er No' Des%ri&tiona 3". :ature of plan assets.b 3$. Definition of actual return on plan assets.b 3%. )ension sset * +iability.c 4(. te!s included in pension e0pense.a 41. Definition of pension e0pense.c 42. &ecognition of prior ser#ice costs.c 43. !orti'ation of prior ser#ice costs.b 44. !orti'ation !etods for prior ser#ice costs.a 45. Defined-benefit plan a!end!ent.d 46. ne0pected gains and losses.b 4". &ecording gains and losses.a 4$. se of fair #alue of plan asset.a 4%. ain or loss caused by a plant closing.a 5(. &eporting pension asset.d 51. ntangible asset;deferred pension cost.

a 52. dentification of a balance seet account.a 53. &ecognition of pension asset.b 54. Disclosures of pension plan infor!ation.c 55. Function of )ension 9enefit uaranty orporation.c


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MU)TIP)E CHOICE*Co.&utationa

Ans+er No' Des%ri&tionb "". alculate pro,ected benefit obligation balance.c "$. alculate fair #alue of plan assets.b "%. alculate a!orti'ation of prior ser#ice cost.c $(. alculate interest cost.b $1. Deter!ine actual return on plan assets.c $2. alculate te une0pected gain on plan assets.b $3. Deter!ine te corridor.b $4. alculate a!orti'ation of net gain.a $5. alculate pension asset * liability recogni'ed in te balance seet.c $6. alculate pension liability.d $". alculate pension liability.c $$. alculate pension liability.b $%. alculate a!ount of intangible asset.d %(. alculate pension liability.b %1. Deter!ine pension liability to be reported.

d %2. Deter!ine pension asset * liability to be reported.d %3. Deter!ine balance of pro,ected benefit obligation.c %4. Deter!ine fair #alue of plan assets.d %5. Deter!ine pension asset * liability to be reported.a %6. Deter!ine pension liability to be reported.b easuring and recording pension e0pense.

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E/ERCISES ,%ont'-

Ite. Des%ri&tion/2(-1(% >easuring and recording pension e0pense./2(-11( dditional pension liability./2(-111 )ension reconciliation scedule./2(-112 )ension plan calculations./2(-113 )ension plan calculation and entries./2(-114 orridor a!orti'ation./2(-115 orridor approac a!orti'ation of net gains and losses.7/2(-116 )ension plan calculations and ,ournal entry.


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SUMMAR OF )EARNING OBECTI1ES B 3UESTIONS

Ite. T4&e Ite. T4&e Ite. T4&e Ite. T4&e Ite. T4&e Ite. T4&e Ite. T4&e

)earnin5 O!6e%tive 7

1. TF 2. TF 21. > 22. >


3. TF 4. TF 23. > 24. > 25. > 826. > 82". >


5. TF 2$. > 3(. > 32. > 11". /6. TF 2%. > 31. > 1(6. /


". TF 36. > 64. > "1. > $(. > 1(". /$. TF 3". > 65. > "2. > $1. > 1($. /

33. > 3$. > 66. > "3. > 1((. / 1(%. /34. > 3%. > 6". > "4. > 1(1. / 116. /

35. > 4(. > 6$. > "5. > 1(6. / 12(. ))earnin5 O!6e%tive :

%. TF 1(. TF 41. > "". > "$. > 121. )

)earnin5 O!6e%tive ;

11. TF 42. > 44. > "%. > 1(%. / 122. )12. TF 43. > 45. > 1($. / 11%. )

)earnin5 O!6e%tive $2. > 112. / 12(. )14. TF "5. > 1(". / 11%. ) 121. )

)earnin5 O!6e%tive =

15. TF 4$. > "6. > $5. > 112. / 115. /16. TF 4%. > $3. > 1(%. / 113. / 12(. )4". > "(. > $4. > 111. / 114. /

)earnin5 O!6e%tive >

1". TF 51. > 56. > $%. > %4. > 1(4. > 12(. )1$. TF 52. > 6%. > %(. > %5. > 1(5. >1%. TF 53. > $6. > %1. > %6. > 11(. /2(. TF 54. > $". > %2. > 1(2. > 111. /5(. > 55. > $$. > %3. > 1(3. > 11%. )

)earnin5 O!6e%tive ?70

5". >

)earnin5 O!6e%tive ?77

5". > 5%. > 61. > 63. > %$. > 111. / 11$. /

5$. > 6(. > 62. > %". > %%. > 11". /

:oteC TF True-False / /0ercise> >ultiple oice ) )roble!

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TRUE(FA)SE*Con%e&tua

1. pension plan is contributory =en te e!ployer !a@es pay!ents to a funding agency.

2. Qualified pension plans per!it deductibility of te e!ployerEs contributions to te pension

fund.

3. n e!ployer does not a#e to report a liability on its balance seet in a defined-benefitplan.

4. /!ployers are at ris@ =it defined-benefit plans because tey !ust contribute enoug to!eet te cost of benefits tat te plan defines.

5. o!panies co!pute te #ested benefit obligation using only #ested benefits? at currentsalary le#els.

6. Te accu!ulated benefit obligation bases te deferred co!pensation a!ount on bot

#ested and non#ested ser#ice using future salary le#els.

". 8er#ice cost is te e0pense caused by te increase in te accu!ulated benefit obligationbecause of e!ployeesE ser#ice during te current year.

$. Te interest co!ponent of pension e0pense in te current period is co!puted by!ultiplying te settle!ent rate by te beginning balance of te pro,ected benefitobligation.

%. o!panies recogni'e te accu!ulated benefit obligation in teir accounts and in teirfinancial state!ents.

1(. Te )ension sset * +iability account balance eBuals te difference bet=een te pro,ectedbenefit obligation and te fair #alue of pension plan assets.

11. o!panies sould recogni'e te entire increase in pro,ected benefit obligation due to aplan initiation or a!end!ent as pension e0pense in te year of a!end!ent.

12. Te F89 reBuires only te years-of-ser#ice !etod for a!orti'ation of prior ser#ice cost.

13. Te difference bet=een te e0pected return and te actual return is referred to as teune0pected gain or loss.

14. Te une0pected gains and losses fro! canges in te pro,ected benefit obligation are

called asset gains and losses.

15. Te ccu!ulated ter o!preensi#e nco!e *+7 account is a!orti'ed only if ite0ceeds 1( percent of te larger of te beginning balances of te pro,ected benefitobligation or te !ar@et-related plan assets #alue.

16. f te ccu!ulated ter o!preensi#e nco!e *+7 account is less tan te corridor?te net gains and losses are sub,ect to a!orti'ation.

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1". en a co!pany a!ends its defined benefit plan? and recogni'es prior ser#ice? tepro,ected benefit obligation is increased to recogni'e tis additional liability.

1$. o!panies report ccu!ulated ter o!preensi#e nco!e )87 as a liability on tebalance seet.

1%. ter o!preensi#e nco!e )87 is reported as part of net inco!e.

2(. o!panies !ust disclose a reconciliation of o= te pro,ected benefit obligation and tefair #alue of plan assets canged during te year eiter in teir financial state!ents or inte notes.

True(Fase Ans+ers*Con%e&tuaIte. Ans' Ite. Ans' Ite. Ans' Ite. Ans'

1. F 6. F 11. F 16. F2. T ". F 12. F 1". T3. F $. T 13. T 1$. F4. T %. F 14. F 1%. F5. T 1(. T 15. T 2(. T

MU)TIP)E CHOICE*Con%e&tua

21. n deter!ining te present #alue of te prospecti#e benefits often referred to as tepro,ected benefit obligation7? te follo=ing are considered by te actuaryCa. retire!ent and !ortality rate.

b. interest rates.c. benefit pro#isions of te plan.d. all of tese factors.

22. n a defined-benefit plan? te process of funding refers toa. deter!ining te pro,ected benefit obligation.b. deter!ining te accu!ulated benefit obligation.c. !a@ing te periodic contributions to a funding agency to ensure tat funds are

a#ailable to !eet retireesA clai!s.d. deter!ining te a!ount tat !igt be reported for pension e0pense.

23. n all pension plans? te accounting proble!s include all te follo=ing except

a. !easuring te a!ount of pension obligation.b. disclosing te status and effects of te plan in te financial state!ents.c. allocating te cost of te plan to te proper periods.d. deter!ining te le#el of indi#idual pre!iu!s.

24. n a defined-contribution plan? a for!ula is used tata. defines te benefits tat te e!ployee =ill recei#e at te ti!e of retire!ent.b. ensures tat pension e0pense and te cas funding a!ount =ill be different.c. reBuires an e!ployer to contribute a certain su! eac period based on te for!ula.d. ensures tat e!ployers are at ris@ to !a@e sure funds are a#ailable at retire!ent.

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25. n a defined-benefit plan? a for!ula is used tata. reBuires tat te benefit of gain or te ris@ of loss fro! te assets contributed to te

pension plan be borne by te e!ployee.b. defines te benefits tat te e!ployee =ill recei#e at te ti!e of retire!ent.c. reBuires tat pension e0pense and te cas funding a!ount be te sa!e.d. defines te contribution te e!ployer is to !a@eG no pro!ise is !ade concerning te

ulti!ate benefits to be paid out to te e!ployees.

26. ic of te follo=ing is not a caracteristic of a defined-contribution pension planHa. Te e!ployerAs contribution eac period is based on a for!ula.b. Te benefits to be recei#ed by e!ployees are usually deter!ined by an e!ployeeEs

tree igest years of salary defined by te ter!s of te plan.c. Te accounting for a defined-contribution plan is straigtfor=ard and unco!plicated.d. Te benefit of gain or te ris@ of loss fro! te assets contributed to te pension fund

are borne by te e!ployee.

2". n accounting for a defined-benefit pension plana. an appropriate funding pattern !ust be establised to ensure tat enoug !onies =ill

be a#ailable at retire!ent to !eet te benefits pro!ised.b. te e!ployerAs responsibility is si!ply to !a@e a contribution eac year based on te

for!ula establised in te plan.c. te e0pense recogni'ed eac period is eBual to te cas contribution.d. te liability is deter!ined based upon @no=n #ariables tat reflect future salary le#els

pro!ised to e!ployees.

2$. lternati#e !etods e0ist for te !easure!ent of te pension obligation liability7. ic!easure reBuires te use of future salaries in its co!putationHa. Vested benefit obligationb. ccu!ulated benefit obligationc. )ro,ected benefit obligation

d. &estructured benefit obligation

2%. Te accu!ulated benefit obligation !easuresa. te pension obligation on te basis of te plan for!ula applied to years of ser#ice to

date and based on e0isting salary le#els.b. te pension obligation on te basis of te plan for!ula applied to years of ser#ice to

date and based on future salary le#els.c. an esti!ated total benefit at retire!ent and ten co!putes te le#el cost tat =ill be

sufficient? togeter =it interest e0pected to accu!ulate at te assu!ed rate? topro#ide te total benefits at retire!ent.

d. te sortest possible period for funding to !a0i!i'e te ta0 deduction.

3(. Te pro,ected benefit obligation is te !easure of pension obligation tata. is reBuired to be used for reporting te ser#ice cost co!ponent of pension e0pense.b. reBuires pension e0pense to be deter!ined solely on te basis of te plan for!ula

applied to years of ser#ice to date and based on e0isting salary le#els.c. reBuires te longest possible period for funding to !a0i!i'e te ta0 deduction.d. is not sanctioned under generally accepted accounting principles for reporting te

ser#ice cost co!ponent of pension e0pense.

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31. Differing !easures of te pension obligation can be based ona. all years of ser#ice;bot #ested and non#ested;using current salary le#els.b. only te #ested benefits using current salary le#els.c. bot #ested and non#ested ser#ice using future salaries.d. all of tese.

32. Vested benefitsa. usually reBuire a certain !ini!u! nu!ber of years of ser#ice.b. are tose tat te e!ployee is entitled to recei#e e#en if fired.c. are not contingent upon additional ser#ice under te plan.d. are defined by all of tese.

33. Te relationsip bet=een te a!ount funded and te a!ount reported for pensione0pense is as follo=sCa. pension e0pense !ust eBual te a!ount funded.b. pension e0pense =ill be less tan te a!ount funded.c. pension e0pense =ill be !ore tan te a!ount funded.d. pension e0pense !ay be greater tan? eBual to? or less tan te a!ount funded.

34. Te co!putation of pension e0pense includes all te follo=ing excepta. ser#ice cost co!ponent !easured using current salary le#els.b. interest on pro,ected benefit obligation.c. e0pected return on plan assets.d. ll of tese are included in te co!putation.

35. n co!puting te ser#ice cost co!ponent of pension e0pense? te F89 concluded tata. te accu!ulated benefit obligation pro#ides a !ore realistic !easure of te pension

obligation on a going concern basis.b. a co!pany sould e!ploy an actuarial funding !etod to report pension e0pense tat

best reflects te cost of benefits to e!ployees.

c. te pro,ected benefit obligation using future co!pensation le#els pro#ides a realistic!easure of present pension obligation and e0pense.

d. all of tese.

36. Te interest on te pro,ected benefit obligation co!ponent of pension e0pensea. reflects te incre!ental borro=ing rate of te e!ployer.b. reflects te rates at =ic pension benefits could be effecti#ely settled.c. is te sa!e as te e0pected return on plan assets.d. !ay be stated i!plicitly or e0plicitly =en reported.

3". ne co!ponent of pension e0pense is e0pected return on plan assets. )lan assetsinclude

a. contributions !ade by te e!ployer and contributions !ade by te e!ployee =en acontributory plan of so!e type is in#ol#ed.

b. plan assets still under te control of te co!pany.c. only assets reported on te balance seet of te e!ployer as prepaid pension cost.d. none of tese.

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45. ene#er a defined-benefit plan is a!ended and credit is gi#en to e!ployees for years ofser#ice pro#ided before te date of a!end!enta. bot te accu!ulated benefit obligation and te pro,ected benefit obligation are

usually greater tan before.b. bot te accu!ulated benefit obligation and te pro,ected benefit obligation are

usually less tan before.c. te e0pense and te liability sould be recogni'ed at te ti!e of te plan cange.d. te e0pense sould be recogni'ed i!!ediately? but te liability !ay be deferred until a

reasonable basis for its deter!ination as been identified.

46. Te actuarial gains or losses tat result fro! canges in te pro,ected benefit obligationare called

sset +iabilityains I +osses ains I +osses

a. es esb. :o :oc. es :o

d. :o es

4". ains and losses tat relate to te co!putation of pension e0pense sould bea. recorded currently as an ad,ust!ent to pension e0pense in te period incurred.b. recorded currently and in te future by applying te corridor !etod =ic pro#ides

te a!ount to be a!orti'ed.c. a!orti'ed o#er a 15-year period.d. recorded only if a loss is deter!ined.

4$. Te fair #alue of pension plan assets is used to deter!ine te corridor and to calculate tee0pected return on plan assets.

/0pected &eturn

orridor on )lan ssetsa. es esb. es :oc. :o esd. :o :o

4%. pension fund gain or loss tat is caused by a plant closing sould bea. recogni'ed i!!ediately as a gain or loss on te plant closing.b. spread o#er te current year and future years.c. carged or credited to te current pension e0pense.d. recogni'ed as a prior period ad,ust!ent.

5(. pension liability is reported =ena. te pro,ected benefit obligation e0ceeds te fair #alue of pension plan assets.b. te accu!ulated benefit obligation is less tan te fair #alue of pension plan assets.c. te pension e0pense reported for te period is greater tan te funding a!ount for te

sa!e period.d. accu!ulated oter co!preensi#e inco!e e0ceeds te fair #alue of pension plan

assets.

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51. pension asset is reported =ena. te accu!ulated benefit obligation e0ceeds te fair #alue of pension plan assets.b. te accu!ulated benefit obligation e0ceeds te fair #alue of pension plan assets? but a

prior ser#ice cost e0ists.c. pension plan assets at fair #alue e0ceed te accu!ulated benefit obligation.d. pension plan assets at fair #alue e0ceed te pro,ected benefit obligation.

52. ic of te follo=ing state!ents is correctHa. Tere is an account titled )ension sset * +iability.b. Tere is an account titled ccu!ulated 9enefit bligation.c. ccu!ulated ter o!preensi#e nco!e sould be reported in te liability section

of te balance seet.d. ter co!preensi#e inco!e )87 sould be included in net inco!e.

53. ccording to te F89? recognition of a liability is reBuired =en te pro,ected benefitobligation e0ceeds te fair #alue of plan assets. on#ersely? =en te fair #alue of planassets e0ceeds te pro,ected benefit obligation? te 9oarda. reBuires recognition of an asset.

b. reBuires recognition of an asset if te e0cess fair #alue of plan assets e0ceeds tecorridor a!ount.

c. reco!!ends recognition of an asset but does not reBuire suc recognition.d. does not per!it recognition of an asset.

54. ic of te follo=ing disclosures of pension plan infor!ation =ould not nor!ally bereBuiredHa. Te !a,or co!ponents of pension e0penseb. Te a!ount of prior ser#ice cost canged or credited in pre#ious years.c. Te funded status of te plan and te a!ounts recogni'ed in te financial state!entsd. Te rates used in !easuring te benefit a!ounts

55. Te !ain purpose of te )ension 9enefit uaranty orporation is toa. reBuire !ini!u! funding of pensions.b. reBuire plan ad!inistrators to publis a co!preensi#e description and su!!ary of

teir plans.c. ad!inister ter!inated plans and to i!pose liens on te e!ployerAs assets for certain

unfunded pension liabilities.d. all of tese.

56. ic of te follo=ing state!ents is true about postretire!ent ealt care benefitsHa. Tey are generally funded.b. Te benefits are =ell-defined and le#el in dollar a!ount.c. Te beneficiary is te retiree? spouse? and oter dependents.

d. Te benefit is payable !ontly.


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MU)TIP)E CHOICE*Co.&utationa

64. )resented belo= is pension infor!ation related to oods? nc. for te year 2(11C

8er#ice cost J"2?(((nterest on pro,ected benefit obligation 54?(((

nterest on #ested benefits 24?(((!orti'ation of prior ser#ice cost due to increase in benefits 12?(((/0pected return on plan assets 1$?(((

Te a!ount of pension e0pense to be reported for 2(11 isa. J1($?(((.b. J144?(((.c. J162?(((.d. J12(?(((.

65. Kraft? nc. sponsors a defined-benefit pension plan. Te follo=ing data relates to teoperation of te plan for te year 2(11.

8er#ice cost J 2((?(((ontributions to te plan 22(?(((ctual return on plan assets 1$(?((()ro,ected benefit obligation beginning of year7 2?4((?(((>ar@et-related and fair #alue of plan assets beginning of year7 1?6((?(((

Te e0pected return on plan assets and te settle!ent rate =ere bot 1(L. Te a!ountof pension e0pense reported for 2(11 isa. J2((?(((.b. J26(?(((.c. J2$(?(((.d. J44(?(((.

66. )resented belo= is infor!ation related to Mensen nc. pension plan for 2(11.8er#ice cost J%((?(((ctual return on plan assets 21(?(((nterest on pro,ected benefit obligation 3%(?(((!orti'ation of net loss %(?(((!orti'ation of prior ser#ice cost due to increase in benefits 165?(((/0pected return on plan assets 1$(?(((

at a!ount sould be reported for pension e0pense in 2(11Ha. J1?365?(((b. J1?335?(((c. J1?515?(((

d. J1?155?(((

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6". 9arton? nc. recei#ed te follo=ing infor!ation fro! its pension plan trustee concerning teoperation of te co!panyAs defined-benefit pension plan for te year ended Dece!ber 31?2(11.

Manuary 1? 2(11 Dece!ber 31? 2(11Fair #alue of pension plan assets J4?2((?((( J4?5((?((()ro,ected benefit obligation 4?$((?((( 5?16(?(((ccu!ulated benefit obligation $4(?((( 1?(2(?(((ccu!ulated N ains * +osses7 -(- %(?(((7

Te ser#ice cost co!ponent of pension e0pense for 2(11 is J36(?((( and tea!orti'ation of prior ser#ice cost due to an increase in benefits is J6(?(((. Te settle!entrate is 1(L and te e0pected rate of return is %L. at is te a!ount of pension e0pensefor 2(11Ha. J36(?(((b. J522?(((c. J531?(((d. J432?(((

se te follo=ing infor!ation for Buestions 6$ troug "(.

Te follo=ing infor!ation for ooper /nterprises is gi#en belo=CDece!ber 31? 2(11

ssets and obligations)lan assets at fair #alue7 J1((?(((ccu!ulated benefit obligation 1$5?((()ro,ected benefit obligation 2((?(((

ter te!s)ension asset * liability? Manuary 1? 2(11 5?(((ontributions 6(?(((ccu!ulated oter co!preensi#e loss $3?%5(

Tere =ere no actuarial gains or losses at Manuary 1? 2(11. Te a#erage re!aining ser#ice life ofe!ployees is 1( years.

6$. at is te pension e0pense tat ooper /nterprises sould report for 2(11Ha. J"6?(5(b. J11(?(((c. J6(?(((d. J$3?%5(

6%. at is te a!ount tat ooper /nterprises sould report as its pension liability on itsbalance seet as of Dece!ber 31? 2(11Ha. J1((?(((

b. J15?(((c. J1$5?(((d. J2((?(((

"(. Te a!orti'ation of ter o!preensi#e +oss for 2(12 isCa. J(b. J6?3%5c. J11?5((d. J$?3%5

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"1. Te follo=ing infor!ation is related to te pension plan of +ong? nc. for 2(11.

ctual return on plan assets J2((?(((!orti'ation of net gain $2?5((!orti'ation of prior ser#ice cost due to increase in benefits 15(?(((/0pected return on plan assets 23(?(((

nterest on pro,ected benefit obligation 362?5((8er#ice cost $((?(((

)ension e0pense for 2(11 isa. J1?1%5?(((.b. J1?165?(((.c. J1?(3(?(((.d. J1?(((?(((.

"2. )resented belo= is pension infor!ation for reen o!pany for te year 2(11C

/0pected return on plan assets J24?(((nterest on #ested benefits 15?(((

8er#ice cost 3(?(((nterest on pro,ected benefit obligation 21?(((!orti'ation of prior ser#ice cost due to increase in benefits 1$?(((

Te a!ount of pension e0pense to be reported for 2(11 isa. J%3?(((.b. J6%?(((.c. J6(?(((.d. J45?(((.

"3. Oubbard? nc. recei#ed te follo=ing infor!ation fro! its pension plan trustee concerningte operation of te co!panyAs defined-benefit pension plan for te year ended Dece!ber31? 2(11.

1*1*11 12*31*11)ro,ected benefit obligation J11?4((?((( J11?"6(?((()ension assets at fair #alue7 6?(((?((( 6?%((?(((ccu!ulated benefit obligation 2?4((?((( 2?"6(?(((:et gains7 and losses -(- 24(?(((

Te ser#ice cost co!ponent of pension e0pense for 2(11 is J$4(?((( and tea!orti'ation of prior ser#ice cost due to an increase in benefits is J1$(?(((. Tesettle!ent rate is 1(L and te e0pected rate of return is $L. at is te a!ount ofpension e0pense for 2(11Ha. J1?"16?(((b. J1?6$(?(((c. J1?6($?(((d. J1?44(?(((

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se te follo=ing infor!ation for Buestions "4 troug "6.

Te follo=ing data are for te pension plan for te e!ployees of +oc@ett o!pany.

1*1*1( 12*31*1( 12*31*11ccu!ulated benefit obligation J"?5((?((( J"?$((?((( J1(?2((?(((

)ro,ected benefit obligation $?1((?((( $?4((?((( 11?1((?((()lan assets at fair #alue7 6?%((?((( %?(((?((( %?%((?(((+ N net loss -(- 1?44(?((( 1?5((?(((8ettle!ent rate for year7 1(L %L/0pected rate of return for year7 $L "L

+oc@ettEs contribution =as J1?26(?((( in 2(11 and benefits paid =ere J1?125?(((. +oc@ettesti!ates tat te a#erage re!aining ser#ice life is 15 years.

"4. Te actual return on plan assets in 2(11 =asa. J%((?(((.b. J"65?(((.c. J6((?(((.

d. J465?(((.

"5. ssu!e tat te actual return on plan assets in 2(11 =as J$((?(((. Te une0pected gainon plan assets in 2(11 =asa. J1%1?(((.b. J1"(?(((.c. J14%?(((.d. J1("?(((.

"6. Te corridor for 2(11 =as J%((?(((. Te a!ount of -net loss a!orti'ed in 2(11 =asa. J1((?(((.b. J%6?(((.

c. J42?(((.d. J36?(((.

se te follo=ing infor!ation for Buestions "" and "$.

n Manuary 1? 2(11? :e=lin o. as te follo=ing balancesC

)ro,ected benefit obligation J2?1((?(((Fair #alue of plan assets 1?$((?(((

Te settle!ent rate is 1(L. ter data related to te pension plan for 2(11 areC

8er#ice cost J1$(?(((!orti'ation of prior ser#ice costs due to increase in benefits 6(?(((

ontributions 3((?(((9enefits paid 1(5?(((ctual return on plan assets 23"?(((!orti'ation of net gain 1$?(((

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"". Te balance of te pro,ected benefit obligation at Dece!ber 31? 2(11 isa. J2?6$5?(((.b. J2?3$5?(((.c. J2?355?(((.d. J2?33"?(((.

"$. Te fair #alue of plan assets at Dece!ber 31? 2(11 isa. J2?43(?(((.b. J2?25(?(((.c. J2?232?(((.d. J2?214?(((.

"%. &at@e? nc. as a defined-benefit pension plan co#ering its 5( e!ployees. &at@e agreesto a!end its pension benefits. s a result? te pro,ected benefit obligation increased byJ1?5((?(((. &at@e deter!ined tat all its e!ployees are e0pected to recei#e benefitsunder te plan o#er te ne0t 5 years. n addition? 2(L are e0pected to retire or Buit eacyear. ssu!ing tat &at@e uses te years-of-ser#ice !etod of a!orti'ation for priorser#ice cost? te a!ount reported as a!orti'ation of prior ser#ice cost in year one after

te a!end!ent isa. J3((?(((.b. J5((?(((.c. J15(?(((.d. J4((?(((.

se te follo=ing infor!ation for Buestions $( troug $4.

Te follo=ing infor!ation relates to te pension plan for te e!ployees of Turner o.C

1*1*1( 12*31*1( 12*31*11ccu!. benefit obligation J5?2$(?((( J5?52(?((( J"?2((?((()ro,ected benefit obligation 5?5$(?((( 5?%"6?((( $?((4?(((

Fair #alue of plan assets 5?1((?((( 6?24(?((( 6?$$$?((( N net gain7 or loss -(- $64?(((7 %6(?(((78ettle!ent rate for year7 11L 11L/0pected rate of return for year7 $L "L

Turner esti!ates tat te a#erage re!aining ser#ice life is 16 years. TurnerAs contribution =asJ"56?((( in 2(11 and benefits paid =ere J564?(((.

$(. Te interest cost for 2(11 isa. J53"?$4(.b. J6("?2((.c. J65"?36(.d. J$$(?44(.

$1. Te actual return on plan assets in 2(11 isa. J4($?(((.b. J456?(((.c. J5$$?(((.d. J64$?(((.

2(-1$


19/50


$2. Te une0pected gain or loss on plan assets in 2(11 isa. J3%?36( loss.b. J22?56( gain.c. J1%?2(( gain.d. J214?56( gain.

$3. Te corridor for 2(11 isa. J61%?2((.b. J624?(((.c. J6"$?(((.d. J$((?4((.

$4. Te a!ount of net gain7 a!orti'ed in 2(11 isa. J15?3((.b. J15?(((.c. J11?626.d. J%?%"".

$5. )resented belo= is infor!ation related to Dec@er >anufacturing o!pany as ofDece!ber 31? 2(11C

)ro,ected benefit obligation in e0cess of plan assets J%((?(((ccu!ulated -net gain 3((?(((ccu!ulated )87 4(5?(((

Te a!ount for te prior ser#ice cost is related to an increase in benefits. Te fair #alue ofte pension plan assets is J6((?(((.

Te pension asset * liability reported on te balance seet at Dece!ber 31? 2(11 isa. )ension liability of J3((?(((b. )ension liability of J6((?(((

c. )ension liability of J%((?(((d. )ension liability of J1?3(5?(((

se te follo=ing infor!ation for Buestions $6 and $".

Foster orporation recei#ed te follo=ing report fro! its actuary at te end of te yearC

Dece!ber 31? 2(1( Dece!ber 31? 2(11)ro,ected benefit obligation J1?6((?((( J1?$((?(((ccu!ulated benefit obligation 1?3((?((( 1?4$(?(((Fair #alue of pension plan assets 1?3$(?((( 1?44(?(((

$6. Te a!ount reported as te pension liability at Dece!ber 31? 2(1( is

a. J -(-.b. J2((?(((.c. J22(?(((.d. J3((?(((.

2(-1%


20/50


$". Te a!ount reported as te pension liability at Dece!ber 31? 2(11 isa. J1?$((?(((b. J1?4$(?(((c. J3$(?(((d. J36(?(((

se te follo=ing infor!ation for Buestions $$ and $%.

Te follo=ing infor!ation relates to Mac@son? nc.CFor te ear /nded Dece!ber 31? 2(1( 2(11

)lan assets at fair #alue7 J1?26(?((( J1?$24?((()ension e0pense 5"(?((( 45(?((()ro,ected benefit obligation 1?62(?((( 1?$$4?(((nnual contribution to plan 6((?((( 45(?(((ccu!ulated )87 4$(?((( 42(?(((

$$. Te a!ount reported as te liability for pensions on te Dece!ber 31? 2(1( balance

seet isa. J -(-.b. J3(?(((.c. J36(?(((.d. J3%(?(((.

$%. Te a!ount reported as te liability for pensions on te Dece!ber 31? 2(11 balanceseet isa. J -(-.b. J6(?(((.c. J1?$$4?(((.d. J52(?(((.

%(. )resented belo= is infor!ation related to :oble nc. as of Dece!ber 31? 2(11.

ccu!ulated *+7 J %(?((()ro,ected benefit obligation 3?6((?(((ccu!ulated benefit obligation 3?42(?(((Vested benefits 1?62(?((()lan assets at fair #alue7 3?3$4?(((ccu!ulated )87 -(-

Te a!ount reported as te pension liability on :obleAs balance seet at Dece!ber 31?2(11 is as follo=sCa. J -(-.

b. J36?(((.c. J%(?(((.d. J216?(((.

2(-2(


21/50


%1. &ossi o!pany as a defined-benefit plan. t te end of 2(11? it as deter!ined tefollo=ing infor!ation related to its pension planC

)ro,ected benefit obligation J"((?(((ccu!ulated benefit obligation 66(?(((Fair #alue of pension plan assets 61(?(((

Te a!ount of pension liability tat is reported in &ossiAs balance seet at te end of 2(11 isa. J1((?(((.b. J%(?(((.c. J6(?(((.d. J5(?(((.

%2. )resented belo= is pension infor!ation related to aters o!pany as of Dece!ber 31?2(11C

ccu!ulated benefit obligation J3?(((?((()ro,ected benefit obligation 3?5((?((()lan assets at fair #alue7 3?6((?(((

ccu!ulated * +7 1((?(((Te a!ount to be reported as )ension sset * +iability as of Dece!ber 31? 2(11 isa. )ension +iability of J5((?(((.b. )ension sset of J6((?(((.c. )ension +iability of J1((?(((.d. )ension sset of J1((?(((.

se te follo=ing infor!ation for Buestions %3 and %4.

n Manuary 1? 2(11? )ar@s o. as te follo=ing balancesC

)ro,ected benefit obligation J4?2((?(((Fair #alue of plan assets 3?"5(?(((

Te settle!ent rate is 1(L. ter data related to te pension plan for 2(11 areC

8er#ice cost J24(?(((!orti'ation of prior ser#ice costs 54?(((ontributions 2"(?(((9enefits paid 225?(((ctual return on plan assets 264?(((!orti'ation of net gain 1$?(((

%3. Te balance of te pro,ected benefit obligation at Dece!ber 31? 2(11 isa. J4?5"2?(((.

b. J4?5%(?(((.c. J4?62%?(((.d. J4?635?(((.

%4. Te fair #alue of plan assets at Dece!ber 31? 2(11 isa. J3?531?(((.b. J3?"$%?(((.c. J4?(5%?(((.d. J4?2$4?(((.

2(-21


22/50


%5. Ouggins o!pany as te follo=ing infor!ation at Dece!ber 31? 2(11 related to itspension planC)ro,ected benefit obligation J4?(((?(((ccu!ulated benefit obligation 3?2((?((()lan assets fair #alue7 4?2((?(((ccu!ulated )87 3((?(((

Te a!ount of pension asset * liability Ouggins o!pany =ould recogni'e at Dece!ber 31?2(11 isa. )ension liability of J3((?(((.b. )ension asset of J1?(((?(((.c. )ension liability of J$((?(((.d. )ension asset of J2((?(((.

%6. Te follo=ing pension plan infor!ation is for Farr o!pany at Dece!ber 31? 2(11.

)ro,ected benefit obligation J$?4((?(((ccu!ulated benefit obligation "?5((?(((

)lan assets at fair #alue7 6?15(?(((ccu!ulated )87 54(?((()ension e0pense for 2(11 3?(((?(((ontribution for 2(11 2?4((?(((

Te a!ount to be reported as te liability for pensions on te Dece!ber 31? 2(11 balanceseet isa. J2?25(?(((.b. J1?%5(?(((.c. J1?35(?(((.d. J1?(5(?(((.


23/50



24/50


MU)TIP)E CHOICE*CPA A#a&te#

1((. Te follo=ing infor!ation pertains to Oopson o.As pension planC

ctuarial esti!ate of pro,ected benefit obligation at 1*1*11 J"2?(((ssu!ed discount rate 1(L

8er#ice costs for 2(11 J1$?((()ension benefits paid during 2(11 J15?(((

f no cange in actuarial esti!ates occurred during 2(11? OopsonAs pro,ected benefitobligation at Dece!ber 31? 2(11 =asa. J64?2((.b. J"5?(((.c. J"%?2((.d. J$2?2((.

1(1. nterest cost included in pension e0pense recogni'ed for a period by an e!ployersponsoring a defined-benefit pension plan represents te

a. sortage bet=een te e0pected and actual returns on plan assets.b. increase in te pro,ected benefit obligation due to te passage of ti!e.c. increase in te fair #alue of plan assets due to te passage of ti!e.d. a!orti'ation of te discount on accu!ulated )87.

1(2. +ogan orp.? a co!pany =ose stoc@ is publicly traded? pro#ides a noncontributorydefined-benefit pension plan for its e!ployees. Te co!panyAs actuary as pro#ided tefollo=ing infor!ation for te year ended Dece!ber 31? 2(11C

)ro,ected benefit obligation J6((?(((ccu!ulated benefit obligation 525?(((Fair #alue of plan assets $25?(((8er#ice cost 24(?(((

nterest on pro,ected benefit obligation 24?(((!orti'ation of prior ser#ice cost 6(?(((/0pected and actual return on plan assets $2?5((

Te !ar@et-related asset #alue eBuals te fair #alue of plan assets. :o contributions a#ebeen !ade for 2(11 pension cost. n its Dece!ber 31? 2(11 balance seet? +ogan souldreport a pension asset * liability ofa. )ension liability of J6((?(((b. )ension asset of J$24?(((c. )ension asset of J225?(((d. )ension liability of J525?(((

1(3. 8eigel o. !aintains a defined-benefit pension plan for its e!ployees. t eac balance

seet date? eager sould report a pension asset * liability eBual to tea. accu!ulated benefit obligation.b. pro,ected benefit obligation.c. accu!ulated benefit obligation.d. funded status relati#e to te pro,ected benefit obligation.

2(-24


25/50


1(4. l!an? nc. !aintains a defined-benefit pension plan for its e!ployees. s of Dece!ber31? 2(11? te !ar@et #alue of te plan assets is less tan te accu!ulated benefitobligation. Te pro,ected benefit obligation e0ceeds te accu!ulated benefit obligation. nits balance seet as of Dece!ber 31? 2(11? l!an sould report a liability in te a!ountof tea. e0cess of te pro,ected benefit obligation o#er te fair #alue of te plan assets.b. e0cess of te accu!ulated benefit obligation o#er te fair #alue of te plan assets.c. pro,ected benefit obligation.d. accu!ulated benefit obligation.

1(5. t Dece!ber 31? 2(11? te follo=ing infor!ation =as pro#ided by te Vargas orp.pension plan ad!inistratorC

Fair #alue of plan assets J4?5((?(((ccu!ulated benefit obligation 5?5$(?((()ro,ected benefit obligation "?2((?(((

at is te a!ount of te pension liability tat sould be so=n on VargasA Dece!ber 31?2(11 balance seetH

a. J"?2((?(((b. J2?"((?(((c. J1?62(?(((d. J1?($(?(((

Muti&e C"oi%e Ans+ers*CPA A#a&te#

Ite. Ans' Ite. Ans' Ite. Ans'

1((. d 1(2. c 1(4. a

1(1. b 1(3. d 1(5. b

DERI1ATIONS* Co.&utationa

No' Ans+er Derivation

64. d J"2?((( P J54?((( P J12?((( N J1$?((( J12(?(((.

65. c J2((?((( P J2?4((?((( .1(7 N J1?6((?((( .1(7 J2$(?(((.

66. a J%((?((( P J3%(?((( P J%(?((( P J165?((( N J1$(?((( J1?365?(((.

6". b J36(?((( P J6(?((( P J4?$((?((( .1(7 N J4?2((?((( .(%7 J522?(((.

6$. a J1((?((( P J6(?((( - J$3?%5( J"6?(5(.

6%. a J2((?((( - J1((?((( J1((?(((.

"(. b J$3?%5( - J2(?(((7 R 1( J6?3%5.

"1. d J$((?((( P J362?5(( N J23(?((( N J$2?5(( P J15(?((( J1?(((?(((.

2(-25


26/50


DERI1ATIONS* Co.&utationa ,%ont'-

No' Ans+er Derivation"2. d J3(?((( P J21?((( P J1$?((( N J24?((( J45?(((.

"3. b J$4(?((( P J11?4((?((( .1(7 N J6?(((?((( .($7 P J1$(?((( J1?6$(?(((.

"4. b J%?%((?((( N J%?(((?(((7 N J1?26(?((( P J1?125?((( J"65?(((

"5. b J$((?((( N J%?(((?((( .("7 J1"(?(((.

"6. d J1?44(?((( N J%((?(((7 R 15 J36?(((.

"". b J2?1((?((( P J1$(?((( P J2?1((?((( .1(7 N J1(5?((( J2?3$5?(((.

"$. c J1?$((?((( P J23"?((( P J3((?((( N J1(5?((( J2?232?(((.

"%. b 5( P 4( P 3( P 2( P 1( 15(.

J1?5((?((( R 15( J1(?(((*ser#ice yr.J1(?((( 5( J5((?(((.

$(. c J5?%"6?((( .11 J65"?36(.

$1. b J6?$$$?((( N J6?24(?(((7 N J"56?((( N J564?(((7 J456?(((.

$2. c J456?((( N J6?24(?((( .("7 J1%?2((.

$3. b J6?24(?((( .1( J624?(((.

$4. b J$64?((( N J624?(((7 R 16 J15?(((.

$5. a J%((?((( N J6((?((( J3((?(((.

$6. c J1?6((?((( N J1?3$(?((( J22(?(((.

$". d J1?$((?((( N J1?44(?((( J36(?(((.

$$. c J1?62(?((( N J1?26(?((( J36(?(((.

$%. b J1?$$4?((( N J1?$24?((( J6(?(((.

%(. d J3?6((?((( N J3?3$4?((( J216?(((.

%1. b J"((?((( N J61(?((( J%(?(((.

%2. d J3?6((?((( N J3?5((?((( J1((?(((.

%3. d J4?2((?((( P J24(?((( N J225?((( P J4?2((?((( .1(7 J4?635?(((.

%4. c J3?"5(?((( P J264?((( P J2"(?((( N J225?((( J4?(5%?(((.

%5. d J4?2((?((( N J4?(((?((( J2((?((( sset7.

2(-26


27/50


DERI1ATIONS* Co.&utationa ,%ont'-

%6. a J$?4((?((( N J6?15(?((( J2?25(?(((.


28/50


E@' 20(70ar@et-related asset #alue.b7 ctual return on plan assets.c7 /0pected return on plan assets.

d7 ne0pected gains and losses on plan assets.

Soution 20(70ar@et-related asset #alue is a !o#ing a#erage of pension plan assets calculated o#er not!ore tan fi#e years. Te actual return is =at te plan assets earn during te periodincluding !ar@et appreciation depreciation7. e assu!e tat te fair #alue of te planassets is used in all co!putations.7

b7 Te actual return on plan assets is co!puted by finding te cange in te fair #alue of planassets during te period. Tis cange is ad,usted by deducting contributions and addingbenefits paid out during te year.

c7 Te e0pected return on plan assets is found by !ultiplying te e0pected rate of return by te!ar@et-related asset #alue at te beginning of te period.

d7 n une0pected asset gain occurs =en te actual return on plan assets is greater tan tee0pected return on plan assets and an une0pected loss occurs =en te actual return isless tan te e0pected return.

E@' 20(70=;>easuring and recording pension e0pense.

Kessler? nc. recei#ed te follo=ing infor!ation fro! its pension plan trustee concerning teoperation of te co!panyAs defined-benefit pension plan for te year ended Dece!ber 31? 2(11C

Manuary 1? 2(11 Dece!ber 31? 2(11)ro,ected benefit obligation J2?5((?((( J2?$5(?(((

>ar@et-related asset #alue 1?25(?((( 1?6((?(((ccu!ulated benefit obligation 1?%3(?((( 2?62(?(((ccu!ulated N )87 54(?((( 3((?(((

Te ser#ice cost co!ponent for 2(11 is J15(?((( and te a!orti'ation of prior ser#ice cost isJ24(?(((. Te co!panyAs actual funding of te plan in 2(11 a!ounted to J51(?(((. Tee0pected return on plan assets and te settle!ent rate =ere bot $L.

Instru%tionsa7 Deter!ine te pension e0pense to be reported in 2(11.b7 )repare te ,ournal entry to record pension e0pense and te e!ployersA contribution to te

pension plan in 2(11.

2(-2$


29/50


Soution 20(70=

a7 8er#ice cost J15(?(((nterest on pro,ected benefit obligations J2?5((?((( $L7 2((?(((/0pected return on plan assets J1?25(?((( $L7 1((?(((7!orti'ation of prior ser#ice cost 24(?(((

)ension e0pense;2(11 J4%(?(((

b7 )ension /0pense ......................................................................... 4%(?((()ension sset * +iability ............................................................... 26(?(((

as ................................................................................ 51(?(((ter o!preensi#e nco!e )87 ............................. 24(?(((

E@' 20(70>;>easuring and recording pension e0pense.

)resented belo= is infor!ation related to Mones Depart!ent 8tores? nc. pension plan for 2(11.

ccu!ulated benefit obligation at year-end7 J6((?(((8er#ice cost 52(?(((Funding contribution for 2(11 5((?(((8ettle!ent rate used in actuarial co!putation 1(L/0pected return on plan assets %L!orti'ation of )8 due to benefit increase7 1((?(((!orti'ation of net gains 4$?((()ro,ected benefit obligation at beginning of period7 4$(?(((>ar@et-related and fair7 #alue of plan assets at beginning of period7 36(?(((

Instru%tionsa7 o!pute te a!ount of pension e0pense to be reported for 2(11. 8o= co!putations.7b7 )repare te ,ournal entry to record pension e0pense and te e!ployerAs contribution for

2(11.

Soution 20(70>

a7 8er#ice cost J52(?(((nterest on pro,ected benefit obligation J4$(?((( 1(L7 4$?(((/0pected return on plan assets J36(?((( %L7 32?4((7!orti'ation of )8 1((?(((!orti'ation of net gains 4$?(((7)ension e0pense;2(11 J5$"?6((

b7 )ension /0pense.......................................................................... 5$"?6((ter o!preensi#e nco!e *+7............................................ 4$?(((

as................................................................................. 5((?(((ter o!preensi#e nco!e )87................................ 1((?((()ension sset * +iability.................................................... 35?6((

2(-2%


30/50


E@' 20(770; &ecording pension asset * liability.

>iles o. ad te follo=ing selected balances at Dece!ber 31? 2(11C

)ro,ected benefit obligation J4?"((?(((ccu!ulated benefit obligation 4?55(?(((Fair #alue of plan assets 4?34(?(((

ccu!ulated )87 1"(?(((

Instru%tionsalculate te pension asset * liability to be recorded at Dece!ber 31? 2(11.

Soution 20(770

J4?"((?((( - J 4?34(?((( J36(?(((.

E@' 20(777;)ension calculations.

>ontoya o!pany as a#ailable te follo=ing infor!ation about its defined-benefit pension plan

for te year ending Dece!ber 31? 2(11C8er#ice cost for 2(11 J 25?(((ccu!ulated benefit obligation 6$3?((()lan assets at fair #alue 63(?(((ccu!ulated )87 3((?(((Vested benefit obligation 5(5?(((>ar@et-related asset #alue "25?((()ro,ected benefit obligation $65?(((ccu!ulated net gain %(?(((nterest on pro,ected benefit obligation 64?(((

Instru%tionsa7 alculate te pension asset * liability to be recorded at Dece!ber 31? 2(11.b7 alculate te 2(12 a!orti'ation of te net gain. Te a#erage re!aining ser#ice life of

e!ployees is 1( years.

Soution 20(777a7 J$65?((( - J63(?((( J235?((( )ension liability.

b7 SJ%(?((( N J$65?((( 1(L7U R 1( J35(.

E@' 20(772;)ension plan calculations.

Te follo=ing infor!ation is for te pension plan for te e!ployees of )ayne? nc. 12*31*1( 12*31*11

ccu!ulated benefit obligation J2?$((?((( J3?"6(?((()ro,ected benefit obligation 3?(4(?((( 4?(((?(((Fair #alue of plan assets 3?($(?((( 3?52(?((( N :et gain7 or loss 425?(((7 4$(?(((78ettle!ent rate $L $L/0pected rate of return "L 6L

2(-3(


31/50


)ayne esti!ates tat te a#erage re!aining ser#ice life is 15 years. )ayneAs contribution =asJ52(?((( in 2(11 and benefits paid =ere J2$(?(((.

Instru%tionsa7 alculate te interest cost for 2(11.b7 alculate te actual return on plan assets in 2(11.c7 alculate te une0pected gain or loss in 2(11.d7 alculate te corridor for 2(11 and te a!orti'ation of te net gain for 2(11.

Soution 20(772

a7 J3?(4(?((( $L J243?2((

b7 Fair #alue of plan assets 12*31*117 J3?52(?(((Fair #alue of plan assets 1*1*117 3?($(?(((7

44(?(((ontributions 52(?(((79enefits paid 2$(?(((

ctual return on plan assets J 2((?(((

c7 ctual return see b.7 J 2((?(((/0pected return J3?($(?((( 6L7 1$4?$((ne0pected gain J 15?2((

d7 .1( J3?($(?((( J3($?(((G .1( J3?(4(?((( J3(4?(((.Te corridor is te larger? J3($?(((.J425?((( N J3($?((( J11"?(((G J11"?((( R 15 J"?$(( a!orti'ation of net gain.

E@' 20(778;)ension plan calculations and entries.

8elected nfor!ation about te pension plan of &o!an o. is as follo=sC 12*31*1( 12*31*11

ccu!ulated benefit obligation J4?"((?((( J4?%3(?((()ro,ected benefit obligation 4?$((?((( 5?(2(?(((ccu!ulated )87 1?$((?((( 1?6((?(((Fair #alue of plan assets 4?65(?((( 4?$((?((()ension e0pense 1?(((?((( 1?62(?(((ontribution %$5?((( 1?35(?(((Discount rate for year7 %L $L

Instru%tionsa7 at is te corridor for 2(11Hb7 alculate te pension asset * liability at Dece!ber 31? 2(11.

c7 )repare te entry for 2(11 to record te pension e0pense and contribution.

Soution 20(778

a7 .1( J4?$((?((( J4$(?(((G .1( J4?65(?((( J465?(((Te corridor is te larger? J4$(?(((.

b7 )ro,ected benefit obligation J5?(2(?(((Fair #alue of plan assets 4?$((?(((7)ension asset * liability J 22(?(((

2(-31


32/50


Soution 20(778 cont.7

c7 )ension /0pense.......................................................................... 1?62(?((( as................................................................................. 1?35(?(((

ter o!preensi#e nco!e )87................................ 2((?(((

)ension sset * +iability.................................................... "(?(((

E@' 20(779;orridor a!orti'ation.

/0plain corridor a!orti'ation.

Soution 20(779

Te F89 in#ented te corridor approac for a!orti'ing pension plan gains and losses =entey get too large. Te net gain or loss gets too large =en it e0ceeds te arbitrarily selectedcriterion of 1(L of te larger of te beginning balances of te pro,ected benefit obligation or te

!ar@et-related asset #alue. enerally? te straigt-line !etod? based on ser#ice li#es? is used toa!orti'e tese gains and losses.

E@' 20(77:;orridor approac a!orti'ation of net gains and losses.7

ibbs o!pany as 2(( e!ployees =o are e0pected to recei#e benefits under te co!panyAsdefined-benefit pension plan. Te total nu!ber of ser#ice-years of tese e!ployees is 2?(((. Teactuary for te co!panyAs pension plan calculated te follo=ing net gains and lossesC

For te ear /nded Dece!ber 31 ain7 r +oss

2(1( J66(?(((

2(11 5%4?(((72(12 %%(?(((

)rior to 2(1(? tere =as no unrecogni'ed net gain or loss.

nfor!ation about te co!panyAs pro,ected benefit obligation and !ar@et-related and fair7 #alueof plan assets follo=sC

s of Manuary 12(1( 2(11 2(12

)ro,ected benefit obligation J2?1((?((( J2?34(?((( J2?%4(?(((Fair #alue of plan assets 1?6$(?((( 2?46(?((( 2?55(?(((

Instru%tions9ased on te abo#e infor!ation about ibbs o!pany? prepare a scedule =ic reflects tea!ount of net gain or loss to be a!orti'ed by te co!pany as a co!ponent of pension e0pensefor te years 2(1(? 2(11? and 2(12. Te co!pany a!orti'es net gains or losses using testraigt-line !etod o#er te a#erage ser#ice life of participating e!ployees.

2(-32


33/50


Soution 20(77:

orridor Test and ain*+oss !orti'ation 8cedule

9eginning of ear ccu!ulated )9 )lan ssets orridor ain * +oss7 !orti'ation

2(1( J2?1((?((( J1?6$(?((( J21(?((( J -(- J -(-

2(11 2?34(?((( 2?46(?((( 246?((( 66(?((( 41?4((idland o!pany follo=s .8. ) for its e0ternal financial reporting =ereas 9aileyo!pany follo=s i) for its e0ternal financial reporting. Te a!ount contributed by>idland for its defined contribution plan for 2(11 a!ounted to J4%?((( and te a!ountcontributed by 9ailey for its defined contribution plan for 2(11 a!ounted to J"6?(((. Tere!aining ser#ice li#es of e!ployees at bot fir!s is esti!ated to be 1( years. at is tea!ount of e0pense related to pension costs recogni'ed by eac co!pany in its inco!estate!ent for te year ended Dece!ber 31? 2(11H

>idland 9ailey

a. J 4?%(( J"6?(((b. J4%?((( J"6?(((c. J4%?((( J "?6((d. J 4?%(( J "?6((

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3. >idland o!pany follo=s .8. ) for its e0ternal financial reporting =ereas 9aileyo!pany follo=s i) for its e0ternal financial reporting. 9ot co!panies a#e defined-benefit pension plans. t Dece!ber 31? 2(11? prior to any ad,usting entries? >idlando!panyEs actuarial loss sub,ect to a!orti'ation*recognition a!ounted to J4%?((( and9ailey o!panyEs actuarial loss sub,ect to a!orti'ation*recognition a!ounted to J"6?(((.Te re!aining ser#ices li#es of e!ployees at bot fir!s is esti!ated to be 1( years. atis te !a0i!u! a!ount of loss tat could be recogni'ed by eac co!pany in its inco!estate!ent for te year ended Dece!ber 31? 2(11H

>idland 9aileya. J 4?%(( J"6?(((b. J4%?((( J"6?(((c. J4%?((( J "?6((d. J 4?%(( J "?6((

4. ic of te follo=ing is true =it regard to pension accounting under .8. ) andi)Ha. ccounting for defined-benefit pensions is typically a less i!portant issue in te . 8.

tan in oter parts of te =orld.b. Te accounting for defined-benefit pension plans is te sa!e under .8. ) andi).

c. )rior ser#ice cost is recogni'ed on te balance seet under bot .8. ) andi).

d. )rior ser#ice cost is a!orti'ed into inco!e o#er te e0pected ser#ice li#es ofe!ployees under bot .8. ) and i).

5. )ension liabilities =ill be i!pacted in countries =ere population aging is an issue.ccording to te te0t? =ic of te follo=ing countries*areas is te !ost rapidly aging inte de#eloped =orldHa. Mapan

b. /uropec. nited 8tatesd. ll tree areas are aging at te sa!e appro0i!ate rate? 24L.

6. >idland o!pany follo=s .8. ) for its e0ternal financial reporting =ereas 9aileyo!pany follo=s i) for its e0ternal financial reporting. Te re!aining ser#ice li#es ofe!ployees at bot fir!s is esti!ated to be 1( years. Te follo=ing infor!ation is a#ailablefor eac co!pany at Dece!ber 31? 2(11 related to teir respecti#e defined-benefitpension plans.

>idland 9ailey:et of pension assets and liabilities J1((?((( J13(?((()rior ser#ice cost J24(?((( J1"5?(((

at is te a!ount of prior ser#ice cost recogni'ed by eac co!pany in its inco!estate!ent for te year ended Dece!ber 31? 2(11H

>idland 9aileya. J24(?((( J1"5?(((b. J 24?((( J1"5?(((c. J 24?((( J 1"?5((d. J24(?((( J 1"?5((

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". >idland o!pany follo=s .8. ) for its e0ternal financial reporting =ereas 9aileyo!pany follo=s i) for its e0ternal financial reporting. Te re!aining ser#ice li#es ofe!ployees at bot fir!s is esti!ated to be 1( years. Te follo=ing infor!ation is a#ailablefor eac co!pany at Dece!ber 31? 2(11 related to teir respecti#e defined-benefitpension plans.

>idland 9ailey:et of pension assets and liabilities J1((?((( J13(?((()rior ser#ice cost J24(?((( J1"5?(((

at is te a!ount of )ension sset*+iability recogni'ed by eac co!pany in its inco!estate!ent for te year ended Dece!ber 31? 2(11H

>idland 9aileya. J1((?((( J13(?(((b. J 1(?((( J13(?(((c. J1((?((( J 13?(((d. J 1(?((( J 13?(((

$. >idland o!pany follo=s .8. ) for its e0ternal financial reporting =ereas 9ailey

o!pany follo=s i) for its e0ternal financial reporting. Te re!aining ser#ice li#es ofe!ployees at bot fir!s is esti!ated to be 1( years. Te follo=ing infor!ation is a#ailablefor eac co!pany at Dece!ber 31? 2(11 related to teir respecti#e defined-benefitpension plans.

>idland 9ailey:et of pension assets and liabilities J1((?((( J13(?((()rior ser#ice cost after a!orti'ation? if any7 J24(?((( J1"5?(((

at is te a!ount of )rior 8er#ice ost recogni'ed by eac co!pany on its balanceseet at Dece!ber 31? 2(11H

>idland 9aileya. J24(?((( J1"5?(((b. J-(- J1"5?(((

c. J-(- J-(-d. J24(?((( J-(-

%. Te 89 and te F89 are studying se#eral issues related to accounting for pensionsincluding all of te follo=ing e0cepta. eli!inating s!ooting pro#isions.b. reBuiring co!panies to report actual asset returns and any actuarial gains and losses

directly in te inco!e state!ent.c. reBuiring co!panies to report #arious co!ponents of pension e0pense? suc as

interest cost? separately in te inco!e state!ent along =it oter interest e0pense.d. ll of te abo#e issues are under study by te 89 and te F89.

1(. ic of te follo=ing is false regarding te accounting for pensions under i) and.8. )Ha. )rior ser#ice cost is recogni'ed on te balance seet under .8. ) only.b. nder .8. ) co!panies !ust a!orti'e actuarial gains and losses o#er te

e0pected ser#ice li#es of e!ployees.c. )rior ser#ice cost is a!orti'ed into inco!e o#er te e0pected ser#ice li#es of

e!ployees under .8. ) only.d. nder i) co!panies !ay recogni'e actuarial gains and losses in inco!e

i!!ediately.

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Ans+ers to Muti&e C"oi%e1. c2. b3. a4. d5. a6. c". a$. d%. d1(. c

S"ort Ans+er

1. 9riefly describe so!e of te si!ilarities and differences bet=een .8. ) and i) =itrespect to te accounting for pensions.

1. Te pri!ary i) literature as recently been a!ended? resulting in significant

con#ergence bet=een i) and .8. ) in tis area. For e0a!ple? i) and .8.) separate pension plans into defined contribution plans and defined benefit plans.Te accounting for defined contribution plans is si!ilar. For defined benefit plans? boti) and .8. ) recogni'e te net of te pension assets and liabilities on tebalance seet and bot )s a!orti'e prior ser#ice costs into inco!e o#er tee0pected ser#ice li#es of e!ployees.

:otable differences are tat 17 nli@e .8. )? =ic recogni'es prior ser#ice cost onte balance seet as an ele!ent of ccu!ulated ter o!preensi#e nco!e7? i)does not recogni'e prior ser#ice costs on te balance seet? 27 nder i) co!paniesa#e te coice of recogni'ing actuarial gains and losses in inco!e i!!ediately ora!orti'ing te! o#er te e0pected re!aining =or@ing li#es of e!ployees. .8. )

does not per!it coiceG actuarial gains and losses and prior ser#ice cost7 are recogni'edin ccu!ulated ter o!preensi#e nco!e and a!orti'ed to inco!e o#er re!ainingser#ice li#es.

2. 9riefly discuss te 89*F89 con#ergence efforts in te area of postretire!ent-benefitaccounting.

2. Te F89 and te 89 are =or@ing collaborati#ely on a postretire!ent-benefit pro,ect.s discussed in te capter? te F89 as issued a rule addressing te recognition ofbenefit plans in financial state!ents. Te F89 as begun =or@ on te second pase ofte pro,ect? =ic =ill ree0a!ine e0pense !easure!ent of postretire!ent benefit plans.

Te 89 also as added a pro,ect in tis area but tey are on different scedule. Te89 as recently issued a discussion paper on pensions proposingC 17 eli!ination ofs!ooting #ia te corridor approac? 27 a different presentation of pension costs in teinco!e state!ent? and 37 a ne= category of pensions for accounting purposes - so-calledWcontribution-based pro!isesX.

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accounting for pensions and postretirement benefits ch20.pdf

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