Unit 11 questions

Question 1

Under the defined contribution pension plan, the employer’s annual pension expense is the amount of:

Answer 1

the contribution defined by the plan’s formula

Question 2

Under a defined contribution pension plan, an employer is obligated to make an annual deposit of $50,000 to the employee pension plan for services rendered by them each year. In Year 1, the employer deposited $70,000 in the employee pension plan. What amount of pension expense did the employer recognize in Year 1?

Answer 2

$50,000

Question 3

Defined contribution or a defined benefit plan, defines the annual amount that an employer has to deposit to fulfill its pension obligation to employees?

Answer 3

A defined contribution plan.

Question 4

The benefits to be paid to employees depend on events that are beyond the employer’s control is what kind of plan?

Answer 4

defined benefit pension plan.

Question 5

A defined benefit plan defines an amount of pension benefits to be provided to each employee. This amount depends on future events, such as (1) how long the employee lives, (2) how many years of service the employee renders, and (3) the employee’s compensation before retirement. Many of these events can or cannot be controlled by the employer?

Answer 5

Cannot be controlled by the employer.

Question 6

The required minimum pension expense consists of the following elements:

Answer 6

+Service cost

+Interest cost

–Expected return on plan assets

±Amortization of net gain or loss

±Amortization of prior service cost of credit

Pension expense

Question 7

How should plan investments be reported in a defined benefit plan’s financial statements?

Answer 7

At fair value.

The annual financial statements of a defined benefit pension plan must include information about the net assets available for benefits at the end of the plan year. Plan investments, whether equity or debt securities, real estate, or other (excluding insurance contracts) must be presented at their fair value at the reporting date.