Intermediate Accounting Theory and Practice

Pages: 14 (3393 words) Published: June 24, 2013
X 120C Intermediate Accounting Theory & Practice

Winter 2013

Quiz 2

Chapter 20

Chapter 21

True-False Conceptual – 40 questions

Multiple Choice Conceptual – 40 questions

STUDENT NAME:__RUPALI KAYPEE_______________________________


Chapter 20

1.A pension plan is contributory when the employer makes payments to a funding agency. F

2.Qualified pension plans permit deductibility of the employer’s contributions to the pension fund. T

3.An employer does not have to report a liability on its balance sheet in a defined-benefit plan. F

4.Employers are at risk with defined-benefit plans because they must contribute enough to meet the cost of benefits that the plan defines.T

5.Companies compute the vested benefit obligation using only vested benefits, at current salary levels. T

6.The accumulated benefit obligation bases the deferred compensation amount on both vested and nonvested service using future salary levels. F

7.Service cost is the expense caused by the increase in the accumulated benefit obligation because of employees’ service during the current year. F

8.The interest component of pension expense in the current period is computed by multiplying the settlement rate by the beginning balance of the projected benefit obligation. T

9.Companies recognize the accumulated benefit obligation in their accounts and in their financial statements. F

10.The Pension Asset / Liability account balance equals the difference between the projected benefit obligation and the fair value of pension plan assets. T

11.Companies should recognize the entire increase in projected benefit obligation due to a plan initiation or amendment as pension expense in the year of amendment. F

12.The FASB requires only the years-of-service method for amortization of prior service cost. F

13.The difference between the expected return and the actual return is referred to as the unexpected gain or loss. T

14.The unexpected gains and losses from changes in the projected benefit obligation are called asset gains and losses. F

15.The Accumulated Other Comprehensive Income (G/L) account is amortized only if it exceeds 10 percent of the larger of the beginning balances of the projected benefit obligation or the market-related plan assets value. T

16.If the Accumulated Other Comprehensive Income (G/L) account is less than the corridor, the net gains and losses are subject to amortization. F

17.When a company amends its defined benefit plan, and recognizes prior service, the projected benefit obligation is increased to recognize this additional liability. T

18.Companies report Accumulated Other Comprehensive Income (PSC) as a liability on the balance sheet. F

19.Other Comprehensive Income (PSC) is reported as part of net income. F

20.Companies must disclose a reconciliation of how the projected benefit obligation and the fair value of plan assets changed during the year either in their financial statements or in the notes. T

Multiple Choice

21.In determining the present value of the prospective benefits (often referred to as the projected benefit obligation), the following are considered by the actuary: a.retirement and mortality rate.

b.interest rates.
c.benefit provisions of the plan.
d.all of these factors.

22.In a defined-benefit plan, the process of funding refers to a.determining the projected benefit obligation.
b.determining the accumulated benefit obligation.
c.making the periodic contributions to a funding agency to ensure that funds are available to meet retirees' claims. d.determining the amount that might be reported for pension expense....
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