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Exam 17: Pensions and Other Postretirement Benefits

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Question 31

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Travis Transportation reported a net loss-AOCI in last year's balance sheet. This year, the company revised its estimate of future salary levels causing its PBO estimate to decline by $12. Also, the $24 million actual return on plan assets was less than the $27 million expected return. Required: 1) Prepare the appropriate journal entries to record the gain and loss. 2) How do this gain and loss affect Travis' income statement, statement of comprehensive income, and balance sheet?

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1) 2) Income statement: Pension gains a...

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Question 32

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

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B) False

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Question 33

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Top Foods has an underfunded pension plan. The pension expense is $58 million. This amount includes a $60 million service cost, a $40 million interest cost, a $45 million reduction for the expected return on plan assets, and a $3 million amortization of a prior service cost. Required: Prepare the appropriate journal entry to record Top's pension expense.

The following information relates to Schmidt Sausage Co.'s defined benefit pension plan during the current reporting year: Required: Determine the amount of pension plan assets at fair value on December 31.

How do U.S. GAAP and IFRS differ with regard to reporting prior service costs.

Dharma Initiative, Inc., has a defined benefit pension plan. Characteristics of the plan during 2013 are as follows: The expected long-term rate of return on plan assets was 8%. There were no AOCI balances related to pensions on January 1, 2013, but at the end of 2013, the company amended the pension formula creating a prior service cost of $24 million. Required: 1. Calculate the pension expense for 2013. 2. Prepare the journal entry to record pension expense, gains or losses, past service cost, funding, and payment of benefits for 2013. 3. What amount will Dharma Initiative report in its 2013 balance sheet as a net pension asset or net pension liability?

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

What is Havana's 2013 actual return on plan assets?

An overfunded pension plan means that the:

Scallion Company received the following reports of its defined benefit pension plan for the current calendar year: The long-term expected rate of return on plan assets is 10%. Assuming no other data are relevant, what is the pension expense for the year?

The key elements of a defined benefit pension plan include all of the following except:

Brown Industries provides postretirement health care benefits to employees. On January 1 of the current calendar year, the following data were available. Management amortizes prior service cost on a straight-line basis. The interest rate is 10%. Service cost for the current year is $95,000. Required: 1) Calculate the prior service cost amortization for the current year. 2) Calculate the postretirement benefit expense for the current year. 3) Prepare the entry to record the postretirement benefit expense for the current year.

Explain how the loss is reported in the financial statements (other than the balance sheet).

Gains and losses can occur with pension plans when:

Recording pension expense would usually:

The net pension liability (PBO minus plan assets) is increased by:

Discuss the accounting for postretirement benefits prior to 1993 and under current GAAP. What are the key differences?

The following is an incomplete pension spreadsheet for the current year for Desperado Corporation. Required: 1) Complete the pension spreadsheet. 2) Prepare the journal entry to record pension expense for the year.

Pension data for Sam Adams Inc. include the following for the current calendar year: Discount rate, 8% Expected return on plan assets, 10% Actual return on plan assets, 9% Service cost, $400,000 Required: 1) Determine pension expense for the year. 2) Prepare the journal entries to record pension expense and funding for the year.

How do retiree health benefits differ from pension benefits with respect to accounting, funding, regulation, and employee benefits?