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Homework answers / question archive / Bakersfield College ACG 2021 Ch17-1 True/False Questions 1)The projected benefit obligation may be less reliable than the accumulated benefit obligation

Bakersfield College ACG 2021 Ch17-1 True/False Questions 1)The projected benefit obligation may be less reliable than the accumulated benefit obligation

Accounting

Bakersfield College

ACG 2021

Ch17-1

True/False Questions

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

 

 

 

 

  1. The amount of the vested benefit obligation is less than the projected benefit obligation and more than the accumulated benefit obligation.

 

 

 

 

  1. An upward revision of inflation and compensation trends would likely cause a gain in the pension benefit obligation.

 

 

 

 

  1. The difference between pension plan assets and the PBO is equal to the funded status of the plan.

 

 

 

 

  1. A net pension asset is the excess of the projected benefit obligation over the plan assets.

 

 

 

Level of Learning: 1 Easy Learning Objective: 17-05

 

  1. If a pension plan is underfunded, the company has a net loss–OCI.

 

 

 

  1. Prior service cost is recognized as pension expense over a period of several years.

 

 

 

  1. A net gain or net loss affects pension expense only if it exceeds 10% of the pension benefit obligation or 10% of plan assets, whichever is lower.

 

 

 

  1. Pension expense and funding amounts are both accounting decisions.

 

 

 

 

  1. There almost always is a balance sheet liability for plans of postretirement benefits other than pensions since very few of these plans are funded.

 

 

 

  1. The expected postretirement benefit obligation (EPBO) is the discounted present value of the total benefits expected to be paid by the employer to the plan participants.

 

 

 

 

  1. Conceptually, the service method provides a better matching of costs and benefits in amortizing prior service cost than does the straight-line method.

 

 

 

Multiple Choice Questions

 

  1. Which of the following is not a requirement for a qualified pension plan?
    1. It cannot discriminate in favor of highly paid employees.
    2. It must cover at least 80% of the employees.
    3. It must be funded in advance of retirement.
    4. Benefits must vest after a specified period of service, commonly five years.

 

 

 

 

  1. Which of the following is not a characteristic of a qualified pension plan?
    1. It can be limited to highly compensated salaried employees.
    2. It must be funded in advance of retirement.
    3. Benefits must vest after a specified period of service.
    4. It must cover at least 70% of employees.

 

 

 

 

  1. Which of the following is not usually part of the pension formula under a defined benefit plan?
    1. Age at retirement.
    2. Number of years of service.
    3. Seniority at time of retirement.
    4. Compensation level.

 

 

 

 

  1. Which of the following describes defined benefit pension plans?
    1. They raise few accounting issues for employers.
    2. Retirement benefits depend on how much money has accumulated in an individual's account.
    3. They are simple to construct.

 

    1. Retirement benefits are based on the plan benefit formula.

 

 

 

 

  1. Which of the following describes defined benefit pension plans?
    1. The investment risk is borne by the employee.
    2. The plans are simple and easy to construct.
    3. The investment risk is borne by the employer.
    4. Retirement benefits depend on the individual's account balance.

 

 

 

 

  1. Defined contribution pension plans that link the amount of contributions to company performance are often called:
    1. Incentive savings plans.
    2. Thrift plans.
    3. Savings plans.
    4. None of the above is correct.

 

 

 

 

  1. The accounting for defined contribution pension plans is easy because each year:
    1. The employer records pension expense equal to the amount paid out to retirees.
    2. The employer records pension expense based on an amount provided by the actuary.
    3. The employer records pension expense equal to the annual contribution.
    4. The employer records pension expense based on the earnings of the plan assets.

 

 

 

 

  1. Which of the following is not an uncertainty that complicates determining how much to set aside each year to ensure that sufficient funds are available to provide the benefits promised under a defined benefit plan?
    1. Employee turnover.
    2. Number of employees who retired last year.
    3. Future inflation rates.
    4. Future compensation levels.

 

 

 

 

  1. To help assess the uncertainties that surround a defined benefit pension plan, corporations frequently hire a(n):
    1. CPA.
    2. Attorney.
    3. Investment analyst.
    4. Actuary.

 

 

 

 

  1. The employer has an obligation to provide future benefits for:
    1. Defined benefit pension plans.
    2. Defined contribution pension plans.
    3. Defined benefit and defined contribution plans.
    4. None of these answer choices are correct.

 

 

 

 

  1. Which of the following statements typifies defined contribution plans?
    1. Investment risk is borne by the corporation sponsoring the plan.
    2. The plans are more complex than defined benefit plans.
    3. Present value factors are used to determine the annual contributions to the plan.
    4. The employer's obligation is satisfied by making the periodic contribution to the plan.

 

 

 

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