Chapter 11

Question 1

Income Statement – Pension Expense

Answer 1

\+ Service cost
\+ Interest cost
– Expected return on plan assets
± Amortization of net gain or loss
± Amortization of prior service cost or credit
= Net periodic pension expense

Question 2

How do you calculate interest costs of a PBO?

Answer 2

beginning BPO x discount rate = interest cost

Question 3

How do you calculate expected returns on a BPO?

Answer 3

expected return = fair value X long term rate

Question 4

in employee benefit pension plans assets are reported at?

Answer 4

fair value

Question 5

IFRS Difference

How is interest income on plan assets recognized under IFRS

Answer 5

It is recognized as a profit or loss

Question 6

IFRS Difference

Remeasurements of plan assets are recognized

Answer 6

As OCI

Question 7

IFRS Difference

Amortization of prior service cost is recognized?

Answer 7

As a debit to OCI

Question 8

Fair value of pension assets

Answer 8

\+ Beginning fair value
\+ Contributions
– Benefits paid
± Actual return on plan assets
= Ending fair value

Question 9

pension is underfunded

Answer 9

pension liability = PBO - Fair value of plan assets

Question 10

pension is overfunded

Answer 10

pension asset = fair value of plan assets - PBO

Question 11

The PBO at the end of a period is calculated as follows:

Answer 11

\+ Beginning PBO
\+ Service cost
\+ Interest cost
\+ Prior service cost
– Prior service credit
– Benefits paid
± Changes in the PBO resulting from
(a) experience different from that assumed
(b) changes in assumptions
= Ending PBO

Question 12

JE for pension expense

Answer 12

DR. Pension expnese

CR. OCI

Question 13

A defined benefit plan must present the following financial statements:

Answer 13

1. A statement of net assets available for benefits

2. A statement of changes in net assets available for benefits

Question 14

the benefit attribution period begins

Answer 14

on the date of hire

Question 15

Define EPBO

Answer 15

is the actuarial present value at a given date of the other postretirement employee benefit

Question 16

Define APBO

Answer 16

the actuarial present value at a given date of the OPEB attributable to the employee’s service as of that date.

Question 17

accounting for compensated absences requires an accrual of a liability when four criteria are met

Answer 17

1. The payment of compensation is probable.
2. The amount can be reasonably estimated.
3. The benefits either vest or accumulate.
4. The compensation relates to employees’ services that have already been rendered.

Question 18

sick pay only needs a liability if?

Answer 18

accrued only if the rights vest

Question 19

the equation for accrued ESOP contribution

Answer 19

C = % X (income tax - C)

Question 20

the measurement dare for ESOP shares using the fair value method?

Answer 20

The date options are granted.

Question 21

How do you book the expense for employee stock options granted.

Answer 21

Calculate total and amortize it over vesting period
DR, Compensation cost
CR APIC