FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 19: Accounting for Post-Retirement Benefits

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Essay

Review LaterAdd Note

Review Later

The board of directors of the Vermont Company is going to adopt a defined benefit pension plan for the company's employees. The board is considering granting pension credit for up to ten 10) years of service rendered prior to the date that the plan is adopted. The board desires to grant the retroactive credit in order to provide equity to employees for their previous years of service. The board has hired an actuary to determine the cost of granting the retroactive credit. The actuary has calculated the cost of the retroactive benefits to be approximately one million dollars. The board has asked the company's controller to explain how the cost of the prior service credit would be accounted for in the financial statements. Required: a. According to current GAAP, the cost of any prior service credit granted to employees is recognized as a liability and reduces other comprehensive income, and it then amortized as a component of pension expense over the current and future periods. The liability is reduced and other comprehensive income is a. Describe the GAAP that would be required by Vermont Company if prior service credit is granted to its employees. b. Many people have argued that the method adopted by the FASB to account for prior service costs has several conceptual flaws. Briefly discuss the flaws of the approach adopted by the FASB for prior service costs. c. The textbook discusses three other approaches that might have been used to account for prior service costs. Describe these three alternative approaches.

Correct Answer

verified

increased as the prior service costs are...

View Answer

Show Answer

Question 42

True/False

Review LaterAdd Note

Review Later

Other postretirement benefits are provided to former employees after employment.

Correct Answer

verified

Show Answer

Question 43

Essay

Review LaterAdd Note

In 2016, the Electrician Company decided to amend its defined benefit pension plan. The amendment gave 7 employees the right to receive future benefits based upon their prior service. Electrician's actuary determined that the prior service cost for this amendment amounts to $550,000. Employee A will retire in 1 year, employee's B & C expect to retire in 2 years, employee D in three years, employee E in 4 years, and employee's F & G in five years. Required: Using the years-of-future service method, prepare the schedules to determine: 1) the amortization fraction for each year 2) the amortization of the prior service cost

Vested benefits are

A pension plan provides for future retirement income based on the employee's earnings and length of service with the company. This type of pension plan is termed a

During 2015, the Electric Company experienced a difference between its expected and actual projected benefit obligation. At the beginning of 2016, Electric's actuary notified them of the following accumulated information related to their plan: On December 31, 2016, Electric is in the process of calculating the net gain or loss to include in its pension expense for 2016. The average remaining service life of its employees is 10 years and there are no differences between the company's expected and annual rate of return on plan assets in 2016. Required: Compute the amount of the net gain or loss to include in the pension expense for 2016. Note whether it is an addition or subtraction to the pension expense.

Benefits for which the employee's right to receive a present or future pension benefit is no longer contingent on remaining in the service of the employer are called

GAAP for pension plans requires companies with defined benefit pension plans to

ACE has a defined benefit pension plan. ACE is preparing the December 31, 2015 financial statement disclosures related to the plan assets. It should disclose which of the following? I. Expected Return on Plan Assets II) Actual Return on Plan Assets

In 2016, the Ballaster Company decided to amend its defined benefit pension plan. The amendment gave 7 employees the right to receive future benefits based upon their prior service. Ballaster's actuary determined that the prior service cost for this amendment amounts to $550,000. One employee will retire in 1 year, 2 expect to retire in 2 years,1 in three years, 1 in 4 years, and 2 in five years. Required: Using the straight line method 1)compute the remaining service life round to 5 decimals) 2) prepare an amortization schedule to amortize the prior service cost

The following information is provided regarding a company's pension plan: Required: a. Prepare the December 31 journal entry to record pension expense. b. Explain the difference between "interest cost" and the "expected return on plan assets."

What five components comprise pension expense?

Teresa Company had the following information related to its pension plan: An additional net loss of $1,990 was reported as of January 1, 2017 see table). This amount has been included in the January 1, 2017, projected benefit obligation balance. Required: Compute the amount of loss that should be included in pension expense in: a. 2017 b. 2018

The IASB's 2011 amendment to IAS 19 removed the smoothing of devices in pension accounting, which means that companies will have to recognize all changes in their projected benefit obligation and plan assets in the current period. These changes will be recorded in pension expense or other comprehensive income. With this change pension expense will have two components. Indicate that those two components are and provide a brief explanation of each.

Which of the following statements is true concerning prior service cost?

Given the following information What is pension expense for 2016?

An Internal Revenue Code rule that impacts the design of pension plans is that:

Accounting for prior service cost prospectively would violate the matching concept because all the services performed by the employees were completed in previous periods.

Which of the following is not a component of pension expense to be reported on a company's income statement?

Which of the following disclosures are required by GAAP for OPEBs?