Test for 20 and 21

Question 1

In a defined-benefit plan, the process of funding refers to

Answer 1

making the periodic contributions to a funding agency to ensure that funds are available to meet retiree’ claims

Question 2

In a defined-contribution plan, a formula is used that

Answer 2

requires an employer to contribute a certain sum each period based on the formula

Question 3

The relationship between the amount funded and the amount reported for pension expense is as follows

Answer 3

pension expense may be greater than, equal to, or less than the amount funded

Question 4

In computing the service cost component of pension expense, the FASB concluded that

Answer 4

the projected benefit obligation using future compensation levels provides a realistic measure of present pension obligation

Question 5

In accounting for a pension plan, any difference between the pension cost charged to expense and the payments into the fund should be reported as

Answer 5

pension asset/liability

Question 6

When a company amends a pension plan, for accounting purposes, prior service costs should be

Answer 6

recorded in other comprehensive (PSC)

Question 7

Gains and losses that relate to the computation of pension expense should be

Answer 7

recorded currently and in the future by applying the corridor method which provides the amount to be amortized.

Question 8

Interest cost included in pension expense recognized for a period by an employer sponsoring a defined-benefit plan represents the

Answer 8

increase in the projected benefit obligation due to the passage of time

Question 9

Which of the following best describes the new rules in accounting for leases

Answer 9

All leases longer than 1 year are capitalized

Question 10

While some leases are accounted for as a sale or purchase, there is theoretic justification for considering all leases to be sales or purchases. The principal reason that supports this idea is that

Answer 10

a lease reflects the purchase or sale of a quantifiable right to use of property

Question 11

What impact does a bargain purchase option have on the present ale of the lease payments computed by the leassee

Answer 11

the present value of the lease payments would be increased by the present value of the option price if, at the inception of the lease agreement, it appeared reasonably certain that the lessee would exercise the option at the end of the lease and purchase the asset at the option price

Question 12

the methods of accounting for a lease by the lessee are

Answer 12

operating and financing lease methods

Question 13

Which of the following is a correct statement of one of the criteria to determine if a lease is a finance lease

Answer 13

the lease term is equal to a major part of the estimated economic life of the leased property

Question 14

A lessee with a finance lease containing a bargain purchase option should amortize the right of use asset over the

Answer 14

asset’s remaining economic life

Question 15

The primary difference between a direct-financing lease and a sales-type lease is the

Answer 15

recognition of the manufacturer’s or dealer’s profit (or loss) at the inception of the lease

Question 16

In a lease that is appropriately recorded as direct-financing lease by the lessor, the income

Answer 16

should be amortized over the period of the lease using the effective interest method