2K Compensation and Benefits

Question 1

Accrual of vacation pay

Answer 1

Dr - Salaries and wages expense

Cr - Salaries and wages payable

Question 2

Payment of vacation pay

Answer 2

Dr - Salaries and wages expense
Dr - Salaries and wages payable
Cr - Cash

Question 3

Defined contribution plan

Answer 3

Based on a percentage of salary

Accrual:
Dr - Pension cost
Cr - Accrued pension liability

Employer contribution
Dr - Accrued pension liability
Cr - Cash

Question 4

According to ASC 715-30 - Defined Benefit Plans for Pension, pension expense is determined by adding or subtracting together four factors:

Answer 4

1. Interest on the projected benefit obligation
2. Actual or expected return on plan assets
3. Amortization of prior service costs
4. Actuarial gains or losses

Question 5

Service cost component location

Answer 5

Part of other expenses

Question 6

Service cost presentation

Answer 6

Retrospectively on the income statement
Prospectively for capitalization on the balance sheet
(service costs can be capitalized if the company manufactures goods for resale)

Question 7

Interest cost (increase in PBO)

Answer 7

Beginning PBO x discount rate (or settlement rate)

Question 8

Actual Return for defined benefit plan

Answer 8

Plan Assets beginning balance
\+ contributions
- benefits paid
\_\_\_\_\_\_\_\_\_\_\_\_
Subtotal

Question 9

Plan assets ending balance > subtotal

Answer 9

Actual return (reduces pension costs)

Question 10

Plan assets ending balance < subtotal

Answer 10

Negative return (increases pension costs)

Question 11

Prior service costs amortization

Answer 11

unamortized prior service costs
____________________
average # of year until retirement

Question 12

Acturial gains and losses

Answer 12

Actual return

- expected return

Question 13

actuary overfunded/underfunded amount

Answer 13

Ending FMV of plan assets
- Ending PBO
_____________
overfunded/underfunded

Must adjust GL underfunded liabilities to actuarial underfunded liability.

Question 14

Underfunded JE

Answer 14

Dr - Other Comprehensive income

Cr - Accrued pension liability

Question 15

Overfunded JE

Answer 15

Dr - Pension Cost
Dr - Prepaid pension costs
Cr - Cash

Question 16

Do not combine all defined benefit plans to determine over/under funded amount

Answer 16

Take each plan separately.

Question 17

Defined benefit plan footnote disclosure

Answer 17

Beginning PBO
\+ interest
\+/- amortization of prior service costs
\+ actuarial gains (if any)
- actuarial losses (if any)
- benefits paid
\_\_\_\_\_\_\_\_\_\_\_\_
Ending PBO

Question 18

Post retirement benefits accounting treatment different from pensions

Answer 18

1. based on current salary levels
2. accum postretirement benefit obligation x settlement rate (discount rate)
3. Not funded
4. not capped (due to unpredictable health care costs)
5. Beneficiary is the retiree, spouse and dependents
6. Benefits are paid as needed

Question 19

Interest costs of postretirement plans

Answer 19

Beginning accum postretirement benefit obligation (APBO)

x settlement rate (discount rate)