Sie sind auf Seite 1von 45

CHAPTER 20

ACCOUNTING FOR PENSIONS AND POSTRETIREMENT BENEFITS


TRUE-FALSEConceptua
An!"e#
F T F T T F F T F T F F T F T F F T F T

No$
1. 2. 3. 4. 5. 6. ". $. %. 1). 11. 12. 13. 14. 15. 16. 1". 1$. 1%. 2).

De!c#%pt%on
Funded pension plan. Qualified pension plans. Defined-contribution plan liability. Defined-benefit plans. Vested benefit obligation. ccu!ulated benefit obligation. Definition of ser#ice cost. Definition of interest cost. &ecogni'ing pro(ected benefit obligation. *repaid+ ccrued *ension ,ost balance. *lan a!end!ent and pro(ected benefit obligation increase. -ears-of-ser#ice a!orti'ation !et.od. /0pected return and actual return. 1ne0pected gains and losses. 1nrecogni'ed 2et 3ain+4oss account and t.e corridor. !orti'ation of net gains and losses. &ecogni'ing a !ini!u! liability. &eporting accrued pension cost and additional liability balances. &ecording /0cess of dditional *ension 4iability 5#er 1nrecogni'ed *rior 6er#ice ,ost. &econciliation of *75 and fair #alue of plan assets.

MULTIPLE CHOICEConceptua
An!"e#
d c d c b b a c a a d d d a c

No$
21. 22. 23. 24. 25. 6 26. 6 2". 6 2$. 2%. 3). 31. 32. 33. 34. 35.

De!c#%pt%on
Factors considered by actuaries. *rocess of funding a pension plan. ccounting proble!s in pension plans. 2ature of a defined-contribution plan. 2ature of a defined-benefit plan. Defined-contribution plan c.aracteristics. ccounting for a defined-benefit plan. *ension obligation !easure!ent using future salaries. Definition of accu!ulated benefit obligation. *ro(ected benefit obligation as a !easure of pension obligation. lternati#e !easures of t.e pension obligation. ,.aracteristics of #ested benefits. *ension funding and pension e0pense recognition. ,o!ponents of pension e0pense. 6er#ice cost calculated using future co!pensation le#els.

20 - 2 b

Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on 36. 6ettle!ent interest rates.

MULTIPLE CHOICEConceptua -cont$.


An!"e#
a b b c d a c b a d b a a c b b a d b c c c b a d b c d
* 6

No$
3". 3$. 3%. * 4). * 41. 42. 43. 44. 6 45. 6 46. 4". 4$. 4%. 5). 51. 52. 53. 6 54. 55. 56. <5". <5$. <5%. <6). <61. <62. <63. <64.

De!c#%pt%on
2ature of plan assets. Definition of actual return on plan assets. *repaid+accrued pension cost. 8te!s included in net pension cost. Definition of accrued pension cost. &ecognition of prior ser#ice costs. !orti'ation of prior ser#ice costs. !orti'ation !et.ods for prior ser#ice costs. Defined-benefit plan a!end!ent. 1ne0pected gains and losses. &ecording unrecogni'ed gains and losses. 1se of !ar9et-related asset #alues. 3ain or loss caused by a plant closing. 6:itc. fro! a defined-benefit plan to a defined-contribution plan. &ecognition of a !ini!u! liability. 8ntangible asset;deferred pension cost. 8dentification of a balance s.eet account. &ecognition of pension asset. Disclosures of pension plan infor!ation. Function of *ension 7enefit 3uaranty ,orporation. *ostretire!ent .ealt. care benefits. Disclosures of postretire!ent benefits. Transition a!ount. *ostretire!ent benefits. ccrual period. /0pected postretire!ent benefit obligation. Transition a!ount. 8te! not recogni'ed.

T.ese =uestions also appear in t.e *roble!-6ol#ing 6ur#i#al 3uide. T.ese =uestions also appear in t.e 6tudy 3uide. <T.is topic is dealt :it. in an ppendi0 to t.e c.apter.

MULTIPLE CHOICECo(putat%ona
An!"e#
d c a b c a b d d b b a

No$
65. 66. 6". 6$. 6%. "). "1. "2. "3. "4. "5. "6.

De!c#%pt%on
,alculate pension e0pense to be recogni'ed. ,alculate pension e0pense. ,alculate pension e0pense for t.e period. ,alculate pension e0pense to be recogni'ed. Deter!ine pension e0pense to be recogni'ed. ,alculate intangible asset to be reported. ,alculate total pension liability to be reported. ,alculate pension e0pense. ,alculate pension e0pense. ,alculate pension e0pense. ,alculate actual return on plan assets. ,alculate une0pected gain on plan assets.

ccounting for *ensions and *ostretire!ent 7enefits d "". ,alculate unrecogni'ed net loss a!orti'ation.

20 - 0

MULTIPLE CHOICECo(putat%ona
An!"e#
b c b c b b a a c a c c b b c b a d d d c b a c c b b b

No$
"$. "%. $). $1. $2. $3. $4. $5. $6. $". $$. $%. %). %1. %2. %3. %4. %5. %6. %". %$. %%. 1)). 1)1. 1)2. <1)3. <1)4. <1)5.

De!c#%pt%on
,alculate pro(ected benefit obligation balance. ,alculate fair #alue of plan assets. ,alculate a!orti'ation of prior ser#ice cost. ,alculate interest cost. Deter!ine actual return on plan assets. ,alculate t.e une0pected gain on plan assets. Deter!ine t.e corridor. ,alculate a!orti'ation of unrecogni'ed net gain. ,alculate accrued pension cost recogni'ed in t.e balance s.eet. ,alculate total pension liability. ,alculate total pension liability reflecting !ini!u! liability. ,alculate !ini!u! liability. ,alculate a!ount of intangible asset. ,alculate !ini!u! liability. ,alculate a!ount of intangible asset. ,alculate !ini!u! liability to be reported. ,alculate intangible asset to be reported. ,alculate total pension liability to be reported. ,alculate a!ount of intangible asset to be reported. Deter!ine balance of pro(ected benefit obligation. Deter!ine fair #alue of plan assets. ,alculate additional pension liability a!ount. ,alculate additional pension liability a!ount. ,alculate !ini!u! liability. Deter!ine a!ount of intangible assets. ,alculate postretire!ent e0pense. ,alculate postretire!ent e0pense. ,alculate postretire!ent e0pense.

MULTIPLE CHOICECPA A)apte)


An!"e#
d b a c d a c c b d

No$
1)6. 1)". 1)$. 1)%. 11). 111. 112. 113. 114. 115.

De!c#%pt%on
Deter!ine t.e pro(ected benefit obligation. 2ature of interest cost. ,alculate prepaid pension cost. Deter!ine t.e accrued pension cost. ,o!parison of ser#ice costs and pension costs in consecuti#e years. ,alculate prepaid pension cost. ,alculate t.e !ini!u! pension liability. >ini!u! liability of a defined-benefit plan. >ini!u! liability of a defined-benefit plan. Deter!ine t.e a!ount of pension liability to be reported.

E/ERCISES
Ite(
/2)-116 /2)-11"

De!c#%pt%on
*ension accounting ter!inology. *ension assets.

20 - 3

Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on >easuring and recording pension e0pense.

/2)-11$

E/ERCISES -cont$.
Ite(
/2)-11% /2)-12) /2)-121 /2)-122 /2)-123 /2)-124 /2)-125 /2)-126 </2)-12" </2)-12$

De!c#%pt%on
>easuring and recording pension e0pense. dditional pension liability. *ension reconciliation sc.edule. *ension plan calculations. *ension plan calculation and entries. ,orridor a!orti'ation. ,orridor approac. a!orti'ation of net gains and losses. *ension plan calculations and (ournal entries. ,o!puting and recording postretire!ent e0pense. ,o!puting postretire!ent e0pense and *75.

PROBLEMS
Ite(
*2)-12% *2)-13) *2)-131 *2)-132

De!c#%pt%on
>easuring? recording? and reporting pension e0pense and liability. >easuring and recording pension e0pense. *reparing a pension :or9 s.eet. !orti'ation of prior ser#ice cost.

CHAPTER LEARNING OB1ECTI2ES


1. 2. 3. 4. 5. 6. ". $. %. 1). <11. <12. Distinguis. bet:een accounting for t.e e!ployer@s pension plan and accounting for t.e pension fund. 8dentify types of pension plans and t.eir c.aracteristics. /0plain alternati#e !easures for #aluing t.e pension obligation. 4ist t.e co!ponents of pension e0pense. 1se a :or9s.eet for e!ployer@s pension plan entries. Describe t.e a!orti'ation of unrecogni'ed prior ser#ice costs. /0plain t.e accounting procedure for recogni'ing une0pected gains and losses. /0plain t.e corridor approac. to a!orti'ing unrecogni'ed gains and losses. /0plain t.e recognition of a !ini!u! liability. Describe t.e re=uire!ents for reporting pension plans in financial state!ents. 8dentify t.e differences bet:een pensions and postretire!ent .ealt.care benefits. ,ontrast accounting for pensions to accounting for ot.er postretire!ent benefits.

ccounting for *ensions and *ostretire!ent 7enefits

20 - :

SUMMAR4 OF LEARNING OB1ECTI2ES B4 5UESTIONS


Item 1. 3. 5. 6. ". $. 33. 34. 35. %. 11. 12. 13. 14. 15. 16. 4". 1". 1$. 1%. 51. 52. 53. 2). 5". 5$. 5%. 2oteA Type TF TF TF TF TF TF >, >, >, TF TF TF TF TF TF TF >, TF TF TF >, >, >, TF >, >, >, 6). 61. >, >, 62. 63. Lea#n%n* O67ect%8e ?92 >, 64. >, 1)4. >, 1)3. >, 1)5. / B /0ercise * B *roble! >, >, 12". 12$. / /
6

Item 2. 4. 2$. 2%.

Type TF TF >, >, >, >, >, >, >, TF >, >, >, >, >, >, >, >, >, >, >, >, >, >,

Item 21. 23. 3). 31. 65. 66. 6". 6$. 6%.
*

Type

Item

Type

Item

Type

Item

Type

Item

Type

36. 3". 3$. 3%. * 4). 1). 42. 43.


6

41. 44. 45.

46. "6. 4$. 4%. 5).

$3. 11". "". $4. $5. %). %1. %2. %3. %4. %5. 56.

54. "). "1. $". $$. $%. 55.

Lea#n%n* O67ect%8e 9 >, 22. >, Lea#n%n* O67ect%8e 2 >, 24. >, 25. Lea#n%n* O67ect%8e 0 >, 32. >, 12%. >, 116. / Lea#n%n* O67ect%8e 3 >, "2. >, $2. >, "3. >, 1)6. >, "4. >, 1)". >, "5. >, 1)$. >, $1. >, 1)%. Lea#n%n* O67ect%8e : >, "$. >, "%. Lea#n%n* O67ect%8e ; >, $). >, 12). >, 11). >, 121. Lea#n%n* O67ect%8e < >, 122. / 131. / 12%. * Lea#n%n* O67ect%8e = >, $6. >, 122. >, 11%. / 123. >, 121. / 124. Lea#n%n* O67ect%8e > >, %6. >, 1)2. >, %". >, 111. >, %$. >, 112. >, %%. >, 113. >, 1)). >, 114. >, 1)1. >, 115. Lea#n%n* O67ect%8e 90 >, Lea#n%n* O67ect%8e ?99

>, *

26.

>,

2".

>,

>, >, >, >, >, >, / / *

116. 11". 11$. 11%. 12%. 11). 13). 132.

/ / / / * >, * *

13).

131.

/ / / >, >, >, >, >, >,

125. 13).

/ *

11%. 12). 121. 122. 123. 126.

/ / / / / /

12%. 13). 131.

* * *

TF B True-False >, B >ultiple ,.oice

20 - ;

Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on

TRUE-FALSEConceptua
1. 2. 3. 4. 5. 6. ". $. %. 1). 11. 12. 13. 14. 15. pension plan is contributory :.en t.e e!ployer !a9es pay!ents to a funding agency. Qualified pension plans per!it deductibility of t.e e!ployerCs contributions to t.e pension fund. n e!ployer reports no liability on its balance s.eet in a defined-contribution plan. /!ployers are at ris9 :it. defined-benefit plans because t.ey !ust contribute enoug. to !eet t.e cost of benefits t.at t.e plan defines. ,o!panies co!pute t.e #ested benefit obligation using only #ested benefits? at current salary le#els. T.e accu!ulated benefit obligation bases t.e deferred co!pensation a!ount on bot. #ested and non#ested ser#ice using future salary le#els. 6er#ice cost is t.e e0pense caused by t.e increase in t.e accu!ulated benefit obligation because of e!ployeesC ser#ice during t.e current year. T.e interest co!ponent of pension e0pense is t.e interest for t.e period on t.e pro(ected benefit obligation outstanding during t.e period. ,o!panies recogni'e t.e pro(ected benefit obligation in t.eir accounts and in t.eir financial state!ents. T.e *repaid+ ccrued *ension ,ost account balance e=uals t.e difference bet:een t.e pro(ected benefit obligation and t.e pension plan assets. ,o!panies s.ould recogni'e t.e entire increase in pro(ected benefit obligation due to a plan initiation or a!end!ent as pension e0pense in t.e year of a!end!ent. T.e F 67 re=uires t.e years-of-ser#ice !et.od for a!orti'ation of unrecogni'ed prior ser#ice cost. T.e difference bet:een t.e e0pected return and t.e actual return is referred to as t.e une0pected gain or loss. T.e une0pected gains and losses fro! c.anges in t.e pro(ected benefit obligation are called asset gains and losses. T.e 1nrecogni'ed 2et 3ain+4oss account is li!ited to 1) percent of t.e larger of t.e beginning balances of t.e pro(ected benefit obligation or t.e !ar9et-related plan assets #alue. 8f t.e unrecogni'ed gain or loss is less t.an t.e corridor? t.e net gains and losses are sub(ect to a!orti'ation. !ini!u! liability is recogni'ed :.en t.e pro(ected benefit obligation e0ceeds t.e fair #alue of pension plan assets.

16. 1".

ccounting for *ensions and *ostretire!ent 7enefits 1$. 1%.

20 - <

,o!panies can co!bine t.e accrued pension cost balance and t.e additional liability balance for balance s.eet purposes. D.en t.e additional liability e0ceeds t.e a!ount of unrecogni'ed prior ser#ice cost? t.e e0cess is credited to /0cess of dditional *ension 4iability 5#er 1nrecogni'ed *rior 6er#ice ,ost. ,o!panies !ust disclose a reconciliation of .o: t.e pro(ected benefit obligation and t.e fair #alue of plan assets c.anged during t.e year eit.er in t.eir financial state!ents or in t.e notes.

2).

T#ue-Fa !e An!"e#!Conceptua
Ite( 1. 2. 3. 4. 5. An!$ F T F T T Ite( 6. ". $. %. 1). An!$ F F T F T Ite( 11. 12. 13. 14. 15. An!$ F F T F T Ite( 16. 1". 1$. 1%. 2). An!$ F F T F T

MULTIPLE CHOICEConceptua
21. 8n deter!ining t.e present #alue of t.e prospecti#e benefits Eoften referred to as t.e pro(ected benefit obligationF? t.e follo:ing are considered by t.e actuaryA a. retire!ent and !ortality rate. b. interest rates. c. benefit pro#isions of t.e plan. d. all of t.ese factors. 8n a defined-benefit plan? t.e process of funding refers to a. deter!ining t.e pro(ected benefit obligation. b. deter!ining t.e accu!ulated benefit obligation. c. !a9ing t.e periodic contributions to a funding agency to ensure t.at funds are a#ailable to !eet retirees@ clai!s. d. deter!ining t.e a!ount t.at !ig.t be reported for pension e0pense. 8n all pension plans? t.e accounting proble!s include all t.e follo:ing except a. !easuring t.e a!ount of pension obligation. b. disclosing t.e status and effects of t.e plan in t.e financial state!ents. c. allocating t.e cost of t.e plan to t.e proper periods. d. deter!ining t.e le#el of indi#idual pre!iu!s. 8n a defined-contribution plan? a for!ula is used t.at a. defines t.e benefits t.at t.e e!ployee :ill recei#e at t.e ti!e of retire!ent. b. ensures t.at pension e0pense and t.e cas. funding a!ount :ill be different. c. re=uires an e!ployer to contribute a certain su! eac. period based on t.e for!ula. d. ensures t.at e!ployers are at ris9 to !a9e sure funds are a#ailable at retire!ent.

22.

23.

24.

20 - = 25.

Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on 8n a defined-benefit plan? a for!ula is used t.at a. re=uires t.at t.e benefit of gain or t.e ris9 of loss fro! t.e assets contributed to t.e pension plan be borne by t.e e!ployee. b. defines t.e benefits t.at t.e e!ployee :ill recei#e at t.e ti!e of retire!ent. c. re=uires t.at pension e0pense and t.e cas. funding a!ount be t.e sa!e. d. defines t.e contribution t.e e!ployer is to !a9eG no pro!ise is !ade concerning t.e ulti!ate benefits to be paid out to t.e e!ployees. D.ic. of t.e follo:ing is not a c.aracteristic of a defined-contribution pension planH a. T.e e!ployer@s contribution eac. period is based on a for!ula. b. T.e benefits to be recei#ed by e!ployees are defined by t.e ter!s of t.e plan. c. T.e accounting for a defined-contribution plan is straig.tfor:ard and unco!plicated. d. T.e benefit of gain or t.e ris9 of loss fro! t.e assets contributed to t.e pension fund are borne by t.e e!ployee. 8n accounting for a defined-benefit pension plan a. an appropriate funding pattern !ust be establis.ed to ensure t.at enoug. !onies :ill be a#ailable at retire!ent to !eet t.e benefits pro!ised. b. t.e e!ployer@s responsibility is si!ply to !a9e a contribution eac. year based on t.e for!ula establis.ed in t.e plan. c. t.e e0pense recogni'ed eac. period is e=ual to t.e cas. contribution. d. t.e liability is deter!ined based upon 9no:n #ariables t.at reflect future salary le#els pro!ised to e!ployees. lternati#e !et.ods e0ist for t.e !easure!ent of t.e pension obligation EliabilityF. D.ic. !easure re=uires t.e use of future salaries in its co!putationH a. Vested benefit obligation b. ccu!ulated benefit obligation c. *ro(ected benefit obligation d. &estructured benefit obligation T.e accu!ulated benefit obligation !easures a. t.e pension obligation on t.e basis of t.e plan for!ula applied to years of ser#ice to date and based on e0isting salary le#els. b. t.e pension obligation on t.e basis of t.e plan for!ula applied to years of ser#ice to date and based on future salary le#els. c. an esti!ated total benefit at retire!ent and t.en co!putes t.e le#el cost t.at :ill be sufficient? toget.er :it. interest e0pected to accu!ulate at t.e assu!ed rate? to pro#ide t.e total benefits at retire!ent. d. t.e s.ortest possible period for funding to !a0i!i'e t.e ta0 deduction. T.e pro(ected benefit obligation is t.e !easure of pension obligation t.at a. is re=uired to be used for reporting t.e ser#ice cost co!ponent of pension e0pense. b. re=uires pension e0pense to be deter!ined solely on t.e basis of t.e plan for!ula applied to years of ser#ice to date and based on e0isting salary le#els. c. re=uires t.e longest possible period for funding to !a0i!i'e t.e ta0 deduction. d. is not sanctioned under generally accepted accounting principles for reporting t.e ser#ice cost co!ponent of pension e0pense.

26.

2".

2$.

2%.

3).

ccounting for *ensions and *ostretire!ent 7enefits 31. Differing !easures of t.e pension obligation can be based on a. all years of ser#ice;bot. #ested and non#ested;using current salary le#els. b. only t.e #ested benefits using current salary le#els. c. bot. #ested and non#ested ser#ice using future salaries. d. all of t.ese. Vested benefits a. usually re=uire a certain !ini!u! nu!ber of years of ser#ice. b. are t.ose t.at t.e e!ployee is entitled to recei#e e#en if fired. c. are not contingent upon additional ser#ice under t.e plan. d. are defined by all of t.ese.

20 - >

32.

33.

T.e relations.ip bet:een t.e a!ount funded and t.e a!ount reported for pension e0pense is as follo:sA a. pension e0pense !ust e=ual t.e a!ount funded. b. pension e0pense :ill be less t.an t.e a!ount funded. c. pension e0pense :ill be !ore t.an t.e a!ount funded. d. pension e0pense !ay be greater t.an? e=ual to? or less t.an t.e a!ount funded. T.e co!putation of pension e0pense includes all t.e follo:ing except a. ser#ice cost co!ponent !easured using current salary le#els. b. interest on pro(ected benefit obligation. c. e0pected return on plan assets. d. ll of t.ese are included in t.e co!putation. 8n co!puting t.e ser#ice cost co!ponent of pension e0pense? t.e F 67 concluded t.at a. t.e accu!ulated benefit obligation pro#ides a !ore realistic !easure of t.e pension obligation on a going concern basis. b. a co!pany s.ould e!ploy an actuarial funding !et.od to report pension e0pense t.at best reflects t.e cost of benefits to e!ployees. c. t.e pro(ected benefit obligation using future co!pensation le#els pro#ides a realistic !easure of present pension obligation and e0pense. d. all of t.ese. T.e interest on t.e pro(ected benefit obligation co!ponent of pension e0pense a. reflects t.e incre!ental borro:ing rate of t.e e!ployer. b. reflects t.e rates at :.ic. pension benefits could be effecti#ely settled. c. is t.e sa!e as t.e e0pected return on plan assets. d. !ay be stated i!plicitly or e0plicitly :.en reported. 5ne co!ponent of pension e0pense is e0pected return on plan assets. *lan assets include a. contributions !ade by t.e e!ployer and contributions !ade by t.e e!ployee :.en a contributory plan of so!e type is in#ol#ed. b. plan assets still under t.e control of t.e co!pany. c. only assets reported on t.e balance s.eet of t.e e!ployer as prepaid pension cost. d. none of t.ese.

34.

35.

36.

3".

20 - 90 Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on 3$. T.e actual return on plan assets a. is e=ual to t.e c.ange in t.e fair #alue of t.e plan assets during t.e year. b. includes interest? di#idends? and c.anges in t.e !ar9et #alue of t.e fund assets. c. is e=ual to t.e actual rate of return ti!es t.e fair #alue of t.e plan assets at t.e beginning of t.e period. d. all of t.ese. 8n accounting for a pension plan? any difference bet:een t.e pension cost c.arged to e0pense and t.e pay!ents into t.e fund s.ould be reported as a. an offset to t.e liability for prior ser#ice cost. b. accrued or prepaid pension cost. c. an accrued actuarial liability. d. a c.arge or credit to unreali'ed appreciation and depreciation. D.ic. of t.e follo:ing ite!s s.ould be included in t.e net pension cost calculated by an e!ployer :.o sponsors a defined-benefit pension plan for its e!ployeesH Fair #alue of plan assets -es -es 2o 2o !orti'ation of unrecogni'ed prior ser#ice cost -es 2o -es 2o

3%.

4).

a. b. c. d.
*

41.

corporation .as a defined-benefit plan. n accrued pension cost :ill result at t.e end of t.e first year if t.e a. accu!ulated benefit obligation e0ceeds t.e fair #alue of t.e plan assets. b. fair #alue of t.e plan assets e0ceeds t.e accu!ulated benefit obligation. c. a!ount of e!ployer contributions e0ceeds t.e net periodic pension cost. d. a!ount of net periodic pension cost e0ceeds t.e a!ount of e!ployer contributions. D.en a co!pany adopts a pension plan? prior ser#ice costs s.ould be c.arged to a. operations of current and future periods. b. operations of prior periods. c. operations of t.e current period. d. retained earnings. D.en a co!pany a!ends a pension plan? for accounting purposes? prior ser#ice costs s.ould be a. treated as a prior period ad(ust!ent because no future periods are benefited. b. a!orti'ed in accordance :it. procedures used for inco!e ta0 purposes. c. a!orti'ed under accrual accounting to current and future periods benefited. d. treated as an e0pense of t.e period during :.ic. t.e funding occurs. *rior ser#ice cost is a!orti'ed on a a. straig.t-line basis o#er t.e e0pected future years of ser#ice. b. years-of-ser#ice !et.od or on a straig.t-line basis o#er t.e a#erage re!aining ser#ice life of acti#e e!ployees. c. straig.t-line basis o#er 15 years. d. straig.t-line basis o#er t.e a#erage re!aining ser#ice life of acti#e e!ployees or 15 years? :.ic.e#er is longer.

42.

43.

44.

ccounting for *ensions and *ostretire!ent 7enefits


6

20 - 99

45.

D.ene#er a defined-benefit plan is a!ended and credit is gi#en to e!ployees for years of ser#ice pro#ided before t.e date of a!end!ent a. bot. t.e accu!ulated benefit obligation and t.e pro(ected benefit obligation are usually greater t.an before. b. bot. t.e accu!ulated benefit obligation and t.e pro(ected benefit obligation are usually less t.an before. c. t.e e0pense and t.e liability s.ould be recogni'ed at t.e ti!e of t.e plan c.ange. d. t.e e0pense s.ould be recogni'ed i!!ediately? but t.e liability !ay be deferred until a reasonable basis for its deter!ination .as been identified. T.e une0pected gains or losses t.at result fro! c.anges in t.e pro(ected benefit obligation are called sset 3ains I 4osses -es 2o -es 2o 4iability 3ains I 4osses -es 2o 2o -es

46.

a. b. c. d. 4".

1nrecogni'ed gains and losses t.at relate to t.e co!putation of pension e0pense s.ould be a. recorded currently as an ad(ust!ent to pension e0pense in t.e period incurred. b. recorded currently and in t.e future by applying t.e corridor !et.od :.ic. pro#ides t.e a!ount to be a!orti'ed. c. a!orti'ed o#er a 15-year period. d. recorded only if a loss is deter!ined. >ar9et-related asset #alue is used to deter!ine t.e corridor and to calculate t.e e0pected return on plan assets. /0pected &eturn ,orridor on *lan ssets a. -es -es b. -es 2o c. 2o -es d. 2o 2o a. b. c. d. pension fund gain or loss t.at is caused by a plant closing s.ould be recogni'ed i!!ediately as a gain or loss on t.e plant closing. spread o#er t.e current year and future years. c.arged or credited to t.e current pension e0pense. recogni'ed as a prior period ad(ust!ent.

4$.

4%.

5).

D.en a co!pany s:itc.es fro! a defined-benefit to a defined-contribution plan? any gain arising !ust generally be reported a. in t.e current and prospecti#e periods on a straig.t-line basis. b. as a prior period ad(ust!ent. c. currently as a gain. d. in t.e current and prospecti#e periods on a declining-balance !et.od o#er t.e a#erage re!aining ser#ice life of e0isting e!ployees.

20 - 92 Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on 51. !ini!u! liability for pension e0pense is reported :.en a. t.e pro(ected benefit obligation e0ceeds t.e fair #alue of pension plan assets. b. t.e accu!ulated benefit obligation e0ceeds t.e fair #alue of pension plan assets. c. t.e pension e0pense reported for t.e period is greater t.an t.e funding a!ount for t.e sa!e period. d. #ested benefits e0ceed t.e fair #alue of pension plan assets. n intangible asset Edeferred pension costF is created :.en a. t.e accu!ulated benefit obligation e0ceeds t.e fair #alue of pension plan assets? but accrued pension cost and unrecogni'ed prior ser#ice cost is greater t.an t.is e0cess. b. t.e accu!ulated benefit obligation e0ceeds t.e fair #alue of pension plan assets? but accrued pension cost is less t.an t.is e0cess? and unrecogni'ed prior ser#ice cost e0ists. c. pension plan assets at fair #alue e0ceed t.e accu!ulated benefit obligation. d. pension plan assets at boo9 #alue e0ceed t.e pro(ected benefit obligation. D.ic. of t.e follo:ing state!ents is correctH a. T.ere is an account titled dditional *ension 4iability. b. T.ere is an account titled >ini!u! *ension 4iability. c. ccrued pension cost and additional pension liability s.ould be reported separately on t.e balance s.eet. d. 2one of t.ese. ccording to t.e F 67? i!!ediate recognition of a liability Ereferred to as t.e !ini!u! liabilityF is re=uired :.en t.e accu!ulated benefit obligation e0ceeds t.e fair #alue of plan assets. ,on#ersely? :.en t.e fair #alue of plan assets e0ceeds t.e accu!ulated benefit obligation? t.e 7oard a. re=uires recognition of an asset. b. re=uires recognition of an asset if t.e e0cess fair #alue of plan assets e0ceeds t.e corridor a!ount. c. reco!!ends recognition of an asset but does not re=uire suc. recognition. d. does not per!it recognition of an asset. D.ic. of t.e follo:ing disclosures of pension plan infor!ation :ould not nor!ally be re=uired by Statement of Financial Accounting Standards No. 132 ? J/!ployers@ Disclosure about *ensions and 5t.er *ostretire!ent 7enefitsKH a. T.e !a(or co!ponents of pension e0pense b. T.e a!ount paid fro! t.e pension fund to retirees during t.e period c. T.e funded status of t.e plan and t.e a!ounts recogni'ed in t.e financial state!ents d. T.e rates used in !easuring t.e benefit a!ounts T.e !ain purpose of t.e *ension 7enefit 3uaranty ,orporation is to a. re=uire !ini!u! funding of pensions. b. re=uire plan ad!inistrators to publis. a co!pre.ensi#e description and su!!ary of t.eir plans. c. ad!inister ter!inated plans and to i!pose liens on t.e e!ployer@s assets for certain unfunded pension liabilities. d. all of t.ese.

52.

53.

54.

55.

56.

ccounting for *ensions and *ostretire!ent 7enefits <5".

20 - 90

D.ic. of t.e follo:ing state!ents is true about postretire!ent .ealt. care benefitsH a. T.ey are generally funded. b. T.e benefits are :ell-defined and le#el in dollar a!ount. c. T.e beneficiary is t.e retiree? spouse? and ot.er dependents. d. T.e benefit is payable !ont.ly. D.ic. of t.e follo:ing disclosures of postretire!ent benefits :ould not be re=uired by professional pronounce!entsH a. *ostretire!ent e0pense for t.e period b. sc.edule s.o:ing c.anges in postretire!ent benefits and plan assets during t.e year c. T.e a!ount of t.e actuarial liability for postretire!ent benefits d. T.e assu!ptions and rates used in co!puting t.e /*75 and *75 t t.e beginning of t.e year of adoption of Statement of Financial Accounting Standards No. 106? a transition a!ount is co!puted as t.e e0cess of t.e a. e0pected postretire!ent benefit obligation o#er t.e fair #alue of plan assets or #ice #ersa. b. accu!ulated postretire!ent benefit obligation o#er t.e fair #alue of plan assets or #ice #ersa. c. e0pected postretire!ent benefit obligation o#er t.e fair #alue of plan assets? but not #ice #ersa. d. accu!ulated postretire!ent benefit obligation o#er t.e fair #alue of plan assets? but not #ice #ersa. *ostretire!ent benefits !ay include all of t.e follo:ing except a. se#erance pay to laid-off e!ployees. b. dental care. c. legal and ta0 ser#ices. d. tuition assistance. D.ic. of t.e follo:ing state!ents is correctH a. T.e period o#er :.ic. postretire!ent benefits are accrued is called t.e attribution period. b. T.e accrual period generally begins :.en an e!ployee is .ired. c. T.e accrual period generally ends on t.e date t.e e!ployee is eligible to recei#e t.e benefits and ceases to earn additional benefits. d. ll of t.ese. D.ic. of t.e follo:ing state!ents about t.e e0pected postretire!ent benefit obligation E/*75F is not correctH a. T.e /*75 is an actuarial present #alue. b. T.e /*75 is recorded in t.e accounts. c. T.e /*75 is used in !easuring periodic e0pense. d. ll of t.ese are correct. D.ic. of t.e follo:ing state!ents about t.e i!!ediate recognition of a transition a!ount is not correctH a. T.e transition a!ount is recogni'ed in t.e inco!e state!ent as t.e effect of a c.ange in accounting principle. b. T.e transition a!ount is recogni'ed in t.e inco!e state!ent net of ta0. c. &estate!ent of pre#iously issued annual financial state!ents is per!itted. d. T.e transition a!ount is recogni'ed in t.e balance s.eet as a long-ter! liability.

<5$.

<5%.

<6).

<61.

<62.

<63.

20 - 93 Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on <64. D.ic. of t.e follo:ing is a significant ite! not recogni'ed in t.e accounts and in t.e financial state!entsH a. ccu!ulated postretire!ent benefit obligation b. *ostretire!ent benefit plan assets c. /0pected postretire!ent benefit obligation d. ll of t.ese.

Mu t%p e C,o%ce An!"e#!Conceptua


Ite( An!$ Ite( An!$ Ite( An!$ Ite( An!$ Ite( An!$ Ite( An!$ Ite( An!$

21. 22. 23. 24. 25. 26. 2".

d c d c b b a

2$. 2%. 3). 31. 32. 33. 34.

c a a d d d a

35. 36. 3". 3$. 3%. 4). 41.

c b a b b c d

42. 43. 44. 45. 46. 4". 4$.

a c b a d b a

4%. 5). 51. 52. 53. 54. 55.

a c b b a d b

56. <5". <5$. <5%. <6). <61. <62.

c c c b a d b

<63. <64.

c d

MULTIPLE CHOICECo(putat%ona
65. *resented belo: is pension infor!ation related to Tyler? 8nc. for t.e year 2))$A 6er#ice cost L"2?))) 8nterest on pro(ected benefit obligation 54?))) 8nterest on #ested benefits 24?))) !orti'ation of prior ser#ice cost due to increase in benefits 12?))) /0pected return on plan assets 1$?))) T.e a!ount of pension e0pense to be reported for 2))$ is a. L1)$?))). b. L144?))). c. L162?))). d. L12)?))). 66. Moble? 8nc. sponsors a defined-benefit pension plan. T.e follo:ing data relates to t.e operation of t.e plan for t.e year 2))$. 6er#ice cost L 2))?))) ,ontributions to t.e plan 22)?))) ctual return on plan assets 1$)?))) *ro(ected benefit obligation Ebeginning of yearF 2?4))?))) >ar9et-related and fair #alue of plan assets Ebeginning of yearF 1?6))?))) T.e e0pected return on plan assets and t.e settle!ent rate :ere bot. 1)N. T.e a!ount of pension e0pense reported for 2))$ is a. L2))?))). b. L26)?))). c. L2$)?))). d. L44)?))).

ccounting for *ensions and *ostretire!ent 7enefits 6". *resented belo: is infor!ation related to >arley 8nc. pension data for 2))$. 6er#ice cost L%))?))) ctual return on plan assets 21)?))) 8nterest on pro(ected benefit obligation 3%)?))) !orti'ation of unrecogni'ed net loss %)?))) !orti'ation of unrecogni'ed prior ser#ice cost 165?))) /0pected return on plan assets 1$)?))) D.at a!ount s.ould be reported for pension e0pense in 2))$H a. L1?365?))) b. L1?335?))) c. L1?515?))) d. L1?155?))) 6$.

20 - 9:

&andel? 8nc. recei#ed t.e follo:ing infor!ation fro! its pension plan trustee concerning t.e operation of t.e co!pany@s defined-benefit pension plan for t.e year ended Dece!ber 31? 2))". Oanuary 1? 2))$ Dece!ber 31? 2))$ >ar9et-related asset #alue L4?2))?))) L4?5))?))) *ro(ected benefit obligation 4?$))?))) 5?16)?))) ccu!ulated benefit obligation $4)?))) 1?)2)?))) 1nrecogni'ed net EgainsF and losses -)E%)?)))F T.e ser#ice cost co!ponent of pension e0pense for 2))$ is L36)?))) and t.e a!orti'ation of unrecogni'ed prior ser#ice cost is L6)?))). T.e settle!ent rate is 1)N and t.e e0pected rate of return is %N. D.at is t.e a!ount of pension e0pense for 2))$H a. L36)?))) b. L522?))) c. L531?))) d. L432?)))

1se t.e follo:ing infor!ation for =uestions 6% t.roug. "1. T.e follo:ing infor!ation for >onroe /nterprises is gi#en belo:A Dece!ber 31? 2))$ ssets and obligations *lan assets Eat fair #alueF >ar9et-related asset #alue ccu!ulated benefit obligation *ro(ected benefit obligation !ounts to be &ecogni'ed *repaid+EaccruedF pension cost at beginning of year *ension e0pense ,ontribution *repaid+EaccruedF pension cost at end of year 1nrecogni'ed prior ser#ice costs 1nrecogni'ed gains EnetF L1?2))?))) 1?16)?))) 1?2$)?))) 1?$4)?))) E32?)))F E24)?)))F 216?))) L E56?)))F L 2"5?))) E14)?)))F

20 - 9; Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on 6%. D.at is t.e pension e0pense t.at >onroe /nterprises s.ould report for 2))$H a. L216?))) b. L$)?))) c. L24)?))) d. L16$?))) D.at is t.e a!ount t.at >onroe /nterprises s.ould report as 8ntangible *ension ,ost as of Dece!ber 31? 2))$H a. L24?))) b. L$)?))) c. L4$?))) d. L -)sset;Deferred

").

"1.

D.at is t.e a!ount t.at s.ould be reported as t.e total liability related to pensions as of Dece!ber 31? 2))$H a. L24?))) b. L$)?))) c. L4$?))) d. L1?2$)?))) T.e follo:ing infor!ation is related to t.e pension plan of Ming? 8nc. for 2))$. ctual return on plan assets !orti'ation of unrecogni'ed net gain !orti'ation of unrecogni'ed prior ser#ice cost /0pected return on plan assets 8nterest on pro(ected benefit obligation 6er#ice cost *ension e0pense for 2))$ is a. L1?1%5?))). b. L1?165?))). c. L1?)3)?))). d. L1?)))?))). L2))?))) $2?5)) 15)?))) 23)?))) 362?5)) $))?)))

"2.

"3.

*resented belo: is pension infor!ation for Delc. ,o!pany for t.e year 2))$A ctual return on plan assets 8nterest on #ested benefits 6er#ice cost 8nterest on pro(ected benefit obligation !orti'ation of prior ser#ice cost due to increase in benefits T.e a!ount of pension e0pense to be reported for 2))$ is a. L%3?))). b. L6%?))). c. L6)?))). d. L45?))). L24?))) 15?))) 3)?))) 21?))) 1$?)))

ccounting for *ensions and *ostretire!ent 7enefits "4.

20 - 9<

Do:ning? 8nc. recei#ed t.e follo:ing infor!ation fro! its pension plan trustee concerning t.e operation of t.e co!pany@s defined-benefit pension plan for t.e year ended Dece!ber 31? 2))$. 1+1+)$ 12+31+)$ *ro(ected benefit obligation L11?4))?))) L11?"6)?))) >ar9et-related asset #alue 6?)))?))) 6?%))?))) ccu!ulated benefit obligation 2?4))?))) 2?"6)?))) 1nrecogni'ed net EgainsF and losses -)24)?))) T.e ser#ice cost co!ponent of pension e0pense for 2))$ is L$4)?))) and t.e a!orti'ation of unrecogni'ed prior ser#ice cost is L1$)?))). T.e settle!ent rate is 1)N and t.e e0pected rate of return is $N. D.at is t.e a!ount of pension e0pense for 2))$H a. L1?"16?))) b. L1?6$)?))) c. L1?6)$?))) d. L1?44)?)))

1se t.e follo:ing infor!ation for =uestions "5 t.roug. "". T.e follo:ing data are for t.e pension plan for t.e e!ployees of 2ic9els ,o!pany. ccu!ulated benefit obligation *ro(ected benefit obligation >ar9et-related asset #alue *lan assets Eat fair #alueF 1nrecogni'ed net loss 6ettle!ent rate Efor yearF /0pected rate of return Efor yearF 1+1+)" L"?5))?))) $?1))?))) 6?6))?))) 6?%))?))) -)12+31+)" L"?$))?))) $?4))?))) $?"))?))) %?)))?))) 1?44)?))) 1)N $N 12+31+)$ L1)?2))?))) 11?1))?))) %?3))?))) %?%))?))) 1?5))?))) %N "N

2ic9elsC contribution :as L1?26)?))) in 2))$ and benefits paid :ere L1?125?))). 2ic9els esti!ates t.at t.e a#erage re!aining ser#ice life is 15 years. "5. T.e actual return on plan assets in 2))$ :as a. L%))?))). b. L"65?))). c. L6))?))). d. L465?))). T.e actual return on plan assets in 2))$ :as L"65?))). T.e une0pected gain on plan assets in 2))$ :as a. L156?))). b. L135?))). c. L114?))). d. L"2?))). T.e corridor for 2))$ :as L$")?))). T.e a!ount of unrecogni'ed net loss a!orti'ed in 2))$ :as a. L1))?))). b. L%6?))). c. L42?))). d. L3$?))).

"6.

"".

20 - 9= Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on 1se t.e follo:ing infor!ation for =uestions "$ and "%. 5n Oanuary 1? 2))$? Minder ,o. .as t.e follo:ing balancesA *ro(ected benefit obligation Fair #alue of plan assets L2?1))?))) 1?$))?))) L1$)?))) 6)?))) 3))?))) 1)5?))) 23"?))) 1$?)))

T.e settle!ent rate is 1)N. 5t.er data related to t.e pension plan for 2))$ areA 6er#ice cost !orti'ation of unrecogni'ed prior ser#ice costs ,ontributions 7enefits paid ctual return on plan assets !orti'ation of unrecogni'ed net gain "$.

T.e balance of t.e pro(ected benefit obligation at Dece!ber 31? 2))$ is a. L2?6$5?))). b. L2?3$5?))). c. L2?355?))). d. L2?33"?))). T.e fair #alue of plan assets at Dece!ber 31? 2))$ is a. L2?43)?))). b. L2?25)?))). c. L2?232?))). d. L2?214?))). 3illu!? 8nc. .as a defined-benefit pension plan co#ering its 5) e!ployees. 3illu! agrees to a!end its pension benefits. s a result? t.e pro(ected benefit obligation increased by L1?5))?))). 3illu! deter!ined t.at all its e!ployees are e0pected to recei#e benefits under t.e plan o#er t.e ne0t 5 years. 8n addition? 2)N are e0pected to retire or =uit eac. year. ssu!ing t.at 3illu! uses t.e years-of-ser#ice !et.od of a!orti'ation for prior ser#ice cost? t.e a!ount reported as a!orti'ation of prior ser#ice cost in year one after t.e a!end!ent is a. L3))?))). b. L5))?))). c. L15)?))). d. L4))?))).

"%.

$).

1se t.e follo:ing infor!ation for =uestions $1 t.roug. $5. T.e follo:ing infor!ation relates to t.e pension plan for t.e e!ployees of *ol'in ,o.A ccu!. benefit obligation *ro(ected benefit obligation Fair #alue of plan assets >ar9et-related #alue of assets 1nrecogni'ed net EgainF or loss 6ettle!ent rate Efor yearF /0pected rate of return Efor yearF 1+1+)" L5?2$)?))) 5?5$)?))) 5?1))?))) 4?%2)?))) -)12+31+)" L5?52)?))) 5?%"6?))) 6?24)?))) 6?1%2?))) E$64?)))F 11N $N 12+31+)$ L"?2))?))) $?))4?))) 6?$$$?))) 6?"$)?))) E%6)?)))F 11N "N

*ol'in esti!ates t.at t.e a#erage re!aining ser#ice life is 16 years. *ol'in@s contribution :as L3"$?))) in 2))$ and benefits paid :ere L2$2?))).

ccounting for *ensions and *ostretire!ent 7enefits $1. T.e interest cost for 2))$ is a. L53"?$4). b. L6)"?2)). c. L65"?36). d. L$$)?44). T.e actual return on plan assets in 2))$ is a. L4)$?))). b. L456?))). c. L5$$?))). d. L64$?))). T.e une0pected gain or loss on plan assets in 2))$ is a. L3%?36) loss. b. L22?56) gain. c. L152?64) gain. d. L214?56) gain. T.e corridor for 2))$ is a. L61%?2)). b. L624?))). c. L6"$?))). d. L$))?4)). T.e a!ount of unrecogni'ed net gain a!orti'ed in 2))$ is a. L15?3)). b. L15?))). c. L11?626. d. L%?%"".

20 - 9>

$2.

$3.

$4.

$5.

$6.

*resented belo: is infor!ation related to 7itner >anufacturing ,o!pany as of Dece!ber 31? 2))$A *ro(ected benefit obligation in e0cess of plan assets 1nrecogni'ed net gain 1nrecogni'ed prior ser#ice cost L%))?))) 3))?))) 4)5?)))

T.e a!ount to be reported as accrued pension cost at t.e end of 2))$ is a. L -)-. b. L1?))5?))). c. L"%5?))). d. L%))?))).

20 - 20 Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on 1se t.e follo:ing infor!ation for =uestions $" and $$. 7ar9ley ,orporation recei#ed t.e follo:ing report fro! its actuary at t.e end of t.e yearA Dece!ber 31? 2))" Dece!ber 31? 2))$ *ro(ected benefit obligation L1?6))?))) L1?$))?))) >ar9et-related asset #alue 1?4))?))) 1?42)?))) ccu!ulated benefit obligation 1?3))?))) 1?4$)?))) Fair #alue of pension plan assets 1?3$)?))) 1?44)?))) *repaid pension cost $)?))) 1))?))) ssu!e t.at no prepaid or accrued pension cost e0ists on Oanuary 1? 2))". $". T.e a!ount reported as t.e total pension liability at Dece!ber 31? 2))" is a. L -)-. b. L2))?))). c. L22)?))). d. L3))?))). T.e a!ount reported as t.e total pension liability at Dece!ber 31? 2))$ is a. L -)-. b. L14)?))). c. L4)?))). d. L6)?))).

$$.

1se t.e follo:ing infor!ation for =uestions $% t.roug. %2. T.e follo:ing infor!ation relates to Pay:ood? 8nc.A *lan assets Eat fair #alueF *ension e0pense ccu!ulated benefit obligation nnual contribution to plan 1nrecogni'ed prior ser#ice cost For t.e -ear /nded Dece!ber 31? 2))" 2))$ L1?26)?))) L1?$24?))) 5")?))) 45)?))) 1?62)?))) 1?$$4?))) 6))?))) 45)?))) 4$)?))) 42)?)))

*rior to 2))"? cu!ulati#e pension e0pense recogni'ed e=ualed cu!ulati#e contributions. $%. T.e a!ount reported as t.e total liability for pensions on t.e Dece!ber 31? 2))" balance s.eet is a. L -)-. b. L3)?))). c. L36)?))). d. L3%)?))). T.e a!ount reported as an intangible asset on t.e Dece!ber 31? 2))" balance s.eet is a. L -)-. b. L3%)?))). c. L36)?))). d. L3)?))).

%).

ccounting for *ensions and *ostretire!ent 7enefits %1.

20 - 29

T.e a!ount reported as t.e total liability for pensions on t.e Dece!ber 31? 2))$ balance s.eet is a. L -)-. b. L6)?))). c. L3%6)?))). d. L3)?))). T.e a!ount reported as an intangible asset on t.e Dece!ber 31? 2))$ balance s.eet is a. L -)-. b. L6)?))). c. L%)?))). d. L3)?))).

%2.

Questions %3 and %4 relate to t.e infor!ation :.ic. follo:sA *resented belo: is infor!ation related to Mlut. 8nc. as of Dece!ber 31? 2))$. 1nrecogni'ed gains and losses L %)?))) *ro(ected benefit obligation 3?6))?))) ccu!ulated benefit obligation 3?42)?))) Vested benefits 1?62)?))) >ar9et-related asset #alue 3?33)?))) *lan assets Eat fair #alueF 3?3$4?))) 1nrecogni'ed prior ser#ice cost -)ssu!e t.at cu!ulati#e pension e0pense e=ualed pension funding t.roug. 2))$. %3. T.e a!ount reported as t.e total pension liability on Mlut.@s balance s.eet at Dece!ber 31? 2))$ is as follo:sA a. L -)-. b. L36?))). c. L%)?))). d. L216?))). T.e a!ount reported as an intangible asset on Mlut.@s balance s.eet at Dece!ber 31? 2))$ is as follo:sA a. L -)-. b. L36?))). c. L%)?))). d. L216?))). ,oble ,o!pany .as a defined-benefit plan. t t.e end of 2))$? it .as deter!ined t.e follo:ing infor!ation related to its pension planA *ro(ected benefit obligation L"))?))) >ar9et-related asset #alue of pension plan 6))?))) ccu!ulated benefit obligation 66)?))) ccrued pension cost 35?))) Fair #alue of pension plan assets 61)?)))

%4.

%5.

20 - 22 Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on T.e a!ount of t.e total pension liability t.at is reported in ,oble@s balance s.eet at t.e end of 2))$ is a. L1))?))). b. L6)?))). c. L25?))). d. L5)?))). %6. *resented belo: is pension infor!ation related to >arten ,o!pany as of Dece!ber 31? 2))$A ccu!ulated benefit obligation L3?)))?))) *ro(ected benefit obligation 3?5))?))) >ar9et-related asset #alue 2?4))?))) *lan assets Eat fair #alueF 2?5))?))) ccrued pension cost 3))?))) 1nrecogni'ed prior ser#ice cost 1))?))) T.e a!ount to be reported as 8ntangible 31? 2))$ is a. L5))?))). b. L1?)))?))). c. L2))?))). d. L1))?))). sset;Deferred *ension ,ost as of Dece!ber

1se t.e follo:ing infor!ation for =uestions %" and %$. 5n Oanuary 1? 2))$? 2en ,o. .as t.e follo:ing balancesA *ro(ected benefit obligation Fair #alue of plan assets L4?2))?))) 3?"5)?)))

T.e settle!ent rate is 1)N. 5t.er data related to t.e pension plan for 2))$ areA 6er#ice cost L24)?))) !orti'ation of unrecogni'ed prior ser#ice costs 54?))) ,ontributions 2")?))) 7enefits paid 225?))) ctual return on plan assets 264?))) !orti'ation of unrecogni'ed net gain 1$?))) %". T.e balance of t.e pro(ected benefit obligation at Dece!ber 31? 2))$ is a. L4?5"2?))). b. L4?5%)?))). c. L4?62%?))). d. L4?635?))). T.e fair #alue of plan assets at Dece!ber 31? 2))$ is a. L3?531?))). b. L3?"$%?))). c. L4?)5%?))). d. L4?2$4?))).

%$.

ccounting for *ensions and *ostretire!ent 7enefits 1se t.e follo:ing infor!ation for %% and 1)).

20 - 20

6pencer ,o!pany .as t.e follo:ing infor!ation at Dece!ber 31? 2))$ related to its pension planA *ro(ected benefit obligation L4?)))?))) ccu!ulated benefit obligation 3?2))?))) *lan assets Efair #alueF 2?)))?))) ccrued pension cost 3))?))) %%. T.e a!ount of additional pension liability 6pencer ,o!pany :ould recogni'e at Dece!ber 31? 2))$ is a. L3))?))). b. L%))?))). c. L1?2))?))). d. L1?5))?))). D.at a!ount of additional pension liability :ould be recogni'ed if 6pencer ,o!pany .ad prepaid pension cost of L22)?))) rat.er t.an accrued pension cost of L3))?)))H a. L1?42)?))) b. L1?2))?))) c. L%$)?))) d. L22)?)))

1)).

1se t.e follo:ing infor!ation for 1)1 and 1)2. 1)1. T.e follo:ing pension plan infor!ation is for 4add ,o!pany at Dece!ber 31? 2))$. *ro(ected benefit obligation ccu!ulated benefit obligation *lan assets Eat fair #alueF >ar9et-related asset #alue 1nrecogni'ed prior ser#ice cost *ension e0pense for 2))$ ,ontribution for 2))$ L$?4))?))) "?5))?))) 6?15)?))) 6?45)?))) 54)?))) 3?)))?))) 2?4))?)))

*rior to 2))$? cu!ulati#e pension e0pense e=ualed cu!ulati#e contributions. T.e a!ount to be reported as t.e total liability for pensions on t.e Dece!ber 31? 2))$ balance s.eet is a. L2?25)?))). b. L1?%5)?))). c. L1?35)?))). d. L1?)5)?))). 1)2. T.e a!ount to be reported as 8ntangible sset;Deferred *ension ,ost on t.e Dece!ber 31? 2))$ balance s.eet is a. L1?35)?))). b. L"5)?))). c. L54)?))). d. L45)?))).

20 - 23 Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on <1)3. T.e follo:ing facts relate to t.e 4ional ,o. postretire!ent benefits plan for 2))$A 6er#ice cost L1")?))) Discount rate %N *75? Oanuary 1? 2))$ L1?5))?))) /*75? Oanuary 1? 2))$ L2?)))?))) 7enefit pay!ents to e!ployees L115?))) T.e a!ount of postretire!ent e0pense for 2))$ is a. L1")?))). b. L3)5?))). c. L35)?))). d. L42)?))). <1)4. T.e follo:ing facts relate to t.e postretire!ent benefits plan of &a!sey? 8nc. for 2))$A 6er#ice cost L6$)?))) Discount rate $N *75? Oanuary 1? 2))$ Etransition a!ountF L4?)))?))) /*75? Oanuary 1? 2))$ L4?$))?))) #erage re!aining ser#ice to full eligibility 2) years #erage re!aining ser#ice to e0pected retire!ent 25 years T.e a!ount of postretire!ent e0pense for 2))$ is a. L$4)?))). b. L1?16)?))). c. L1?2))?))). d. L1?224?))). <1)5. T.e follo:ing facts relate to t.e lbers ,o. postretire!ent benefits plan for 2))$A 6er#ice cost L126?))) Discount rate 1)N /*75? Oanuary 1? 2))$ L1?)%5?))) *75? Oanuary 1? 2))$ L%))?))) ctual return on plan assets in 2))$ L31?5)) /0pected return on plan assets in 2))$ L24?))) T.e a!ount of postretire!ent e0pense for 2))$ is a. L1$4?5)). b. L1%2?))). c. L211?5)). d. L216?))).

Mu t%p e C,o%ce An!"e#!Co(putat%ona


Ite( An!$ Ite( An!$ Ite( An!$ Ite( An!$ Ite( An!$ Ite( An!$ Ite( An!$

65. 66. 6". 6$. 6%. ").

d c a b c a

"1. "2. "3. "4. "5. "6.

b d d b b a

"". "$. "%. $). $1. $2.

d b c b c b

$3. $4. $5. $6. $". $$.

b a a c a c

$%. %). %1. %2. %3. %4.

c b b c b a

%5. %6. %". %$. %%. 1)).

d d d c b a

1)1. 1)2. <1)3. <1)4. <1)5.

c c b b b

ccounting for *ensions and *ostretire!ent 7enefits

20 - 2:

MULTIPLE CHOICECPA A)apte)


1)6. T.e follo:ing infor!ation pertains to >ellon ,o.@s pension planA ctuarial esti!ate of pro(ected benefit obligation at 1+1+)$ ssu!ed discount rate 6er#ice costs for 2))$ *ension benefits paid during 2))$ L"2?))) 1)N L1$?))) L15?)))

8f no c.ange in actuarial esti!ates occurred during 2))$? >ellon@s pro(ected benefit obligation at Dece!ber 31? 2))$ :as a. L64?2)). b. L"5?))). c. L"%?2)). d. L$2?2)). 1)". 8nterest cost included in t.e net pension cost recogni'ed for a period by an e!ployer sponsoring a defined-benefit pension plan represents t.e a. s.ortage bet:een t.e e0pected and actual returns on plan assets. b. increase in t.e pro(ected benefit obligation due to t.e passage of ti!e. c. increase in t.e fair #alue of plan assets due to t.e passage of ti!e. d. a!orti'ation of t.e discount on unrecogni'ed prior ser#ice cost. 5n Oanuary 1? 2))$? *ratt ,orp. adopted a defined-benefit pension plan. T.e plan@s ser#ice cost of L3))?))) :as fully funded at t.e end of 2))$. *rior ser#ice cost :as funded by a contribution of L12)?))) in 2))$. !orti'ation of prior ser#ice cost :as L4$?))) for 2))$. D.at is t.e a!ount of *rattCs prepaid pension cost at Dece!ber 31? 2))$H a. L"2?))) b. L12)?))) c. L16$?))) d. L1$)?))) &eser ,orp.? a co!pany :.ose stoc9 is publicly traded? pro#ides a noncontributory defined-benefit pension plan for its e!ployees. T.e co!pany@s actuary .as pro#ided t.e follo:ing infor!ation for t.e year ended Dece!ber 31? 2))$A *ro(ected benefit obligation L6))?))) ccu!ulated benefit obligation 525?))) Fair #alue of plan assets $25?))) 6er#ice cost 24)?))) 8nterest on pro(ected benefit obligation 24?))) !orti'ation of unrecogni'ed prior ser#ice cost 6)?))) /0pected and actual return on plan assets $2?5)) T.e !ar9et-related asset #alue e=uals t.e fair #alue of plan assets. *rior contributions to t.e defined-benefit pension plan e=ualed t.e a!ount of net periodic pension cost accrued for t.e pre#ious year end. 2o contributions .a#e been !ade for 2))$ pension cost. 8n its Dece!ber 31? 2))$ balance s.eet? &eser s.ould report an accrued pension cost of a. L4)6?5)). b. L324?))). c. L241?5)). d. L21"?5)).

1)$.

1)%.

20 - 2; Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on 11). /ffecti#e Oanuary 1? 2))"? Quayle ,o. establis.ed a defined-benefit plan :it. no retroacti#e benefits. T.e first of t.e re=uired e=ual annual contributions :as paid on Dece!ber 31? 2))". 1)N discount rate :as used to calculate ser#ice cost and a 1)N rate of return :as assu!ed for plan assets. ll infor!ation on co#ered e!ployees for 2))" and 2))$ is t.e sa!e. Po: s.ould t.e ser#ice cost for 2))$ co!pare :it. 2))"? and s.ould t.e 2))" balance s.eet report an accrued or a prepaid pension costH 6er#ice ,ost *ension ,ost for 2))$ &eported on t.e ,o!pared to 2))" 2))" 7alance 6.eet a. /=ual to ccrued b. /=ual to *repaid c. 3reater t.an ccrued d. 3reater t.an *repaid

1se t.e follo:ing infor!ation for =uestions 111 and 112. To!lin ,o. pro#ides retire!ent benefits to e!ployees t.roug. a funded defined-benefit pension plan. T.e co!pany ad!inistering t.e plan pro#ided t.e follo:ing infor!ation for t.e year ended Dece!ber 31? 2))$A *lan assets at fair #alue L1?2))?))) ccu!ulated benefit obligation 1?335?))) *ension e0pense 3))?))) /!ployer@s contribution? 12+1+)$ 36)?))) 1nrecogni'ed prior ser#ice cost 3)?))) 5n Dece!ber 31? 2))"? t.e accrued+prepaid pension cost account .ad a debit balance of L45?))). ssu!e t.at t.e fair #alue of t.e plan assets is e=ual to t.e !ar9et-related asset #alue. *rior to 2))$? t.e fair #alue of plan assets e0ceeded t.e accu!ulated benefit obligation. 111. t Dece!ber 31? 2))$? :.at is t.e a!ount of prepaid pension costH a. L1)5?))) b. L%)?))) c. L6)?))) d. L15?))) 8n To!lin@s Dece!ber 31? 2))$ balance s.eet? :.at is t.e a!ount of t.e !ini!u! pension liabilityH a. L3)?))) b. L6)?))) c. L135?))) d. L24)?))) -eager ,o. !aintains a defined-benefit pension plan for its e!ployees. s.eet date? -eager s.ould report a !ini!u! liability at least e=ual to t.e a. accu!ulated benefit obligation. b. pro(ected benefit obligation. c. unfunded accu!ulated benefit obligation. d. unfunded pro(ected benefit obligation. t eac. balance

112.

113.

ccounting for *ensions and *ostretire!ent 7enefits 114.

20 - 2<

5.l!an? 8nc. !aintains a defined-benefit pension plan for its e!ployees. s of Dece!ber 31? 2))$? t.e !ar9et #alue of t.e plan assets is less t.an t.e accu!ulated benefit obligation. T.e pro(ected benefit obligation e0ceeds t.e accu!ulated benefit obligation. 8n its balance s.eet as of Dece!ber 31? 2))$? 5.l!an s.ould report a !ini!u! liability in t.e a!ount of t.e a. e0cess of t.e pro(ected benefit obligation o#er t.e #alue of t.e plan assets. b. e0cess of t.e accu!ulated benefit obligation o#er t.e #alue of t.e plan assets. c. pro(ected benefit obligation. d. accu!ulated benefit obligation. t Dece!ber 31? 2))$? t.e follo:ing infor!ation :as pro#ided by t.e 2ilges ,orp. pension plan ad!inistratorA Fair #alue of plan assets L4?5))?))) ccu!ulated benefit obligation 5?5$)?))) *ro(ected benefit obligation "?2))?))) D.at is t.e a!ount of t.e pension liability t.at s.ould be s.o:n on 2ilges@ Dece!ber 31? 2))$ balance s.eetH a. L"?2))?))) b. L2?"))?))) c. L1?62)?))) d. L1?)$)?)))

115.

Mu t%p e C,o%ce An!"e#!CPA A)apte)


Ite( An!$ Ite( An!$ Ite( An!$ Ite( An!$ Ite( An!$

1)6. 1)".

d b

1)$. 1)%.

a c

11). 111.

d a

112. 113.

c c

114. 115.

b d

DERI2ATIONS Co(putat%ona
No$ An!"e#
65. 66. 6". 6$. 6%. "). "1. "2. d c a b c a b d

De#%8at%on
L"2?))) Q L54?))) Q L12?))) R L1$?))) B L12)?))). L2))?))) Q EL2?4))?))) S .1)F R EL1?6))?))) S .1)F B L2$)?))). L%))?))) Q L3%)?))) Q L%)?))) Q L165?))) R L1$)?))) B L1?365?))). L36)?))) Q L6)?))) Q EL4?$))?))) S .1)F R EL4?2))?))) S .)%F B L522?))). L24)?))). L1?2$)?))) R L1?2))?))) B L$)?))) L$)?))) R L56?))) B L24?))). L24?))) Q L56?))) B L$)?))). L$))?))) Q L362?5)) R L23)?))) R L$2?5)) Q L15)?))) B L1?)))?))).

20 - 2= Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on

DERI2ATIONS Co(putat%ona -cont$.


No$ An!"e#
"3. "4. "5. "6. "". "$. "%. $). d b b a d b c b

De#%8at%on
L3)?))) Q L21?))) Q L1$?))) R L24?))) B L45?))). L$4)?))) Q EL11?4))?))) S .1)F R EL6?)))?))) S .)$F Q L1$)?))) B L1?6$)?))). EL%?%))?))) R L%?)))?)))F R L1?26)?))) Q L1?125?))) B L"65?))) L"65?))) R EL$?"))?))) S .)"F B L156?))). EL1?44)?))) R L$")?)))F T 15 B L3$?))). L2?1))?))) Q L1$)?))) Q EL2?1))?))) S .1)F R L1)5?))) B L2?3$5?))). L1?$))?))) Q L23"?))) Q L3))?))) R L1)5?))) B L2?232?))). 5) Q 4) Q 3) Q 2) Q 1) B 15). L1?5))?))) T 15) B L1)?)))+ser#ice yr. L1)?))) S 5) B L5))?))). L5?%"6?))) S .11 B L65"?36). EL6?$$$?))) R L6?24)?)))F R EL"56?))) R L564?)))F B L456?))). L456?))) R EL6?1%2?))) S .)"F B L22?56). L6?1%2?))) S .1) B L61%?2)). EL$64?))) R L61%?2))F T 16 B L15?3)). L%))?))) Q L3))?))) R L4)5?))) B L"%5?))). FV of assets U 75. L1?4$)?))) R L1?44)?))) B L4)?))). L1?62)?))) R L1?26)?))) B L36)?))). L6))?))) R L5")?))) B L3)?))) Eprepaid pension costF L36)?))) Q L3)?))) B L3%)?))). L1?$$4?))) R L1?$24?))) B L6)?))). L45)?))) R L45)?))) B ). L6)?))) Q L3)?))) Efro! prior yearF B L%)?))). L3?42)?))) R L3?3$4?))) B L36?))). 1nrecogni'ed prior ser#ice cost is 'ero. L66)?))) R L61)?))) B L5)?))).

$1. $2. $3. $4. $5. $6. $". $$. $%. %). %1. %2. %3. %4. %5.

c b b a a c a c c b b c b a d

ccounting for *ensions and *ostretire!ent 7enefits

20 - 2>

DERI2ATIONS Co(putat%ona -cont$.


No$ An!"e#
%6. d

De#%8at%on
L3?)))?))) R L2?5))?))) R L3))?))) B L2))?))) Eadditional liabilityF. additional liability U unrecogni'ed prior ser#ice cost. 1nrecogni'ed prior ser#ice cost B L1))?))). L4?2))?))) Q L24)?))) R L225?))) Q EL4?2))?))) S .1)F B L4?635?))). L3?"5)?))) Q L264?))) Q L2")?))) R L225?))) B L4?)5%?))). EL3?2))?))) R L2?)))?)))F R L3))?))) B L%))?))). EL3?2))?))) R L2?)))?)))F Q L22)?))) B L1?42)?))). L"?5))?))) R L6?15)?))) B L1?35)?))) L54)?)))G li!ited to unrecogni'ed *6,. L1")?))) Q L135?))) B L3)5?))). L6$)?))) Q L32)?))) Q L16)?))) B L1?16)?))). L126?))) Q L%)?))) R L31?5)) Q L"?5)) B L1%2?))).

%". %$. %%. 1)). 1)1. 1)2. <1)3. <1)4. <1)5.

d c b a c c b b b

DERI2ATIONS CPA A)apte)


No$ An!"e#
1)6. 1)". 1)$. 1)%. 11). 111. 112. 113. 114. 115. d b a c d a c c b d

De#%8at%on
L"2?))) Q L1$?))) Q EL"2?))) S .1)F R L15?))) B L$2?2)). ,onceptual. EL3))?))) Q L12)?)))F R EL3))?))) Q L4$?)))F B L"2?))). L24)?))) Q L24?))) R L$2?5)) Q L6)?))) B L241?5)). ,onceptual. L36)?))) R L3))?))) Q L45?))) B L1)5?))). L1?335?))) R L1?2))?))) B L135?))). ,onceptual. ,onceptual. L5?5$)?))) R L4?5))?))) B L1?)$)?))).

20 - 00 Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on

E/ERCISES
E@$ 20-99;;*ension accounting ter!inology. 7riefly e0plain t.e follo:ing ter!sA EaF 6er#ice cost EbF 8nterest cost EcF *rior ser#ice cost EdF Vested benefits

So ut%on 20-99; EaF EbF T.e ser#ice cost co!ponent of pension e0pense is t.e actuarial present #alue of benefits attributed by t.e pension benefit for!ula to e!ployee ser#ice during t.e current period. T.e interest cost co!ponent of pension e0pense is t.e interest for t.e period on t.e pro(ected benefit obligation outstanding during t.e period. To si!plify t.e calculation? t.e a!ount of interest is co!puted by applying a single rate to t.e beginning balance of t.e pro(ected benefit obligation. D.en a defined-benefit plan is initiated or a!ended? credit t.at is gi#en to e!ployees for ser#ice pro#ided before t.e date of initiation or a!end!ent results in prior ser#ice cost. T.e a!ount of prior ser#ice cost is co!puted by an actuary. Vested benefits are t.ose t.e e!ployee is entitled to recei#e e#en if t.e e!ployee is no longer e!ployed under t.e plan.

EcF

EdF

E@$ 20-99<;*ension assets. Discuss t.e follo:ing ideas related to pension assetsA EaF >ar9et-related asset #alue. EbF ctual return on plan assets. EcF /0pected return on plan assets. EdF 1ne0pected gains and losses on plan assets.

So ut%on 20-99< EaF EbF >ar9et-related asset #alue is a !o#ing a#erage of pension plan assets calculated o#er not !ore t.an fi#e years. T.e actual return on plan assets is co!puted by finding t.e c.ange in t.e fair #alue of plan assets during t.e period. T.is c.ange is ad(usted by deducting contributions and adding benefits paid out during t.e year. T.e e0pected return on plan assets is found by !ultiplying t.e e0pected rate of return by t.e !ar9et-related asset #alue at t.e beginning of t.e period. n une0pected asset gain occurs :.en t.e actual return on plan assets is greater t.an t.e e0pected return on plan assets and an une0pected loss occurs :.en t.e actual return is less t.an t.e e0pected return.

EcF EdF

ccounting for *ensions and *ostretire!ent 7enefits E@$ 20-99=;>easuring and recording pension e0pense.

20 - 09

3regory? 8nc. recei#ed t.e follo:ing infor!ation fro! its pension plan trustee concerning t.e operation of t.e co!pany@s defined-benefit pension plan for t.e year ended Dece!ber 31? 2))$A Oanuary 1? 2))$ Dece!ber 31? 2))$ *ro(ected benefit obligation L2?5))?))) L2?$5)?))) >ar9et-related asset #alue 1?25)?))) 1?6))?))) ccu!ulated benefit obligation 1?%3)?))) 2?62)?))) 1nrecogni'ed net EgainsF and losses -)3))?))) T.e ser#ice cost co!ponent for 2))$ is L15)?))) and t.e a!orti'ation of prior ser#ice cost is L24)?))). T.e co!pany@s actual funding of t.e plan in 2))$ a!ounted to L51)?))). T.e e0pected return on plan assets and t.e settle!ent rate :ere bot. $N. In!t#uct%on! EaF Deter!ine t.e pension e0pense to be reported in 2))$. EbF *repare t.e (ournal entry to record pension e0pense and t.e e!ployers@ contribution to t.e pension plan in 2))$.

So ut%on 20-99= EaF 6er#ice cost 8nterest on pro(ected benefit obligations EL2?5))?))) S $NF /0pected return on plan assets EL1?25)?))) S $NF !orti'ation of prior ser#ice cost *ension e0pense;2))$ *ension /0pense ......................................................................... *repaid+ ccrued *ension ,ost .................................................... ,as. ................................................................................ L15)?))) 2))?))) E1))?)))F 24)?))) L4%)?))) 4%)?))) 2)?))) 51)?)))

EbF

E@$ 20-99>;>easuring and recording pension e0pense. *resented belo: is infor!ation related to >a(or Depart!ent 6tores? 8nc. pension plan for 2))$. ccu!ulated benefit obligation Eat year-endF L6))?))) 6er#ice cost 52)?))) Funding contribution for 2))$ 5))?))) 6ettle!ent rate used in actuarial co!putation 1)N /0pected return on plan assets %N !orti'ation of prior ser#ice cost 1))?))) !orti'ation of unrecogni'ed net gains 4$?))) *ro(ected benefit obligation Eat beginning of periodF 4$)?))) >ar9et-related asset #alue Eat beginning of periodF 36)?))) In!t#uct%on! EaF ,o!pute t.e a!ount of pension e0pense to be reported for 2))$. E6.o: co!putations.F EbF *repare t.e (ournal entry to record pension e0pense and t.e e!ployer@s contribution for 2))$.

20 - 02 Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on So ut%on 20-99> EaF 6er#ice cost 8nterest on pro(ected benefit obligation EL4$)?))) S 1)NF /0pected return on plan assets EL36)?))) S %NF !orti'ation of prior ser#ice cost !orti'ation of unrecogni'ed net gains *ension e0pense;2))$ *ension /0pense.......................................................................... *repaid+ ccrued *ension ,ost......................................... ,as.................................................................................. L52)?))) 4$?))) E32?4))F 1))?))) E4$?)))F L5$"?6)) 5$"?6)) $"?6)) 5))?)))

EbF

E@$ 20-920; dditional pension liability. &eese ,o. .ad t.e follo:ing selected balances at Dece!ber 31? 2))$A *ro(ected benefit obligation ccu!ulated benefit obligation Fair #alue of plan assets 1nrecogni'ed prior ser#ice cost ccrued pension cost L4?"))?))) 4?55)?))) 4?34)?))) 1")?))) 5)?)))

In!t#uct%on! EaF ,alculate t.e additional pension liability. EbF *repare t.e (ournal entry to record t.e additional pension liability. T.ere :as no additional pension liability balance at t.e beginning of t.e year. So ut%on 20-920 EaF ccu!ulated benefit obligation Fair #alue of plan assets >ini!u! liability ccrued pension cost dditional liability EL4?55)?)))F 4?34)?))) E21)?)))F 5)?))) EL 16)?)))F 16)?))) 16)?)))

EbF

8ntangible sset;Deferred *ension ,ost.................................... dditional *ension 4iability...............................................

E@$ 20-929;*ension reconciliation sc.edule. guilar ,o!pany .as a#ailable t.e follo:ing infor!ation about its defined-benefit pension plan for t.e year ending Dece!ber 31? 2))$A 6er#ice cost for 2))$ L 25?))) ccu!ulated benefit obligation 6$3?))) *lan assets at fair #alue 63)?))) 1nrecogni'ed prior ser#ice cost 3))?))) Vested benefit obligation 5)5?))) >ar9et-related asset #alue "25?))) *ro(ected benefit obligation $65?))) 1nrecogni'ed net gain $)?))) 8nterest on pro(ected benefit obligation 64?))) dditional pension liability 3$?)))

ccounting for *ensions and *ostretire!ent 7enefits E@$ 20-929 Econt.F

20 - 00

In!t#uct%on! *repare a sc.edule :.ic. reconciles t.e funded status of t.e pension plan :it. t.e a!ounts reported in guilar ,o!pany@s balance s.eet at Dece!ber 31? 2))$.

So ut%on 20-929 guilar ,o!pany *ension &econciliation 6c.edule For -ear /nded Dece!ber 31? 2))$ ctuarial present #alue of benefit obligationsA Vested benefit obligation ccu!ulated benefit obligation *ro(ected benefit obligation *lan assets at fair #alue *ro(ected benefit obligation in e0cess of plan assets 1nrecogni'ed prior ser#ice cost 1nrecogni'ed net EgainF or loss *repaid+accrued pension cost dditional pension liability ccrued pension cost liability recogni'ed in t.e balance s.eet L5)5?))) L6$3?))) LE$65?)))F 63)?))) E235?)))F 3))?))) E$)?)))F E15?)))F E3$?)))F L E53?)))F

E@$ 20-922;*ension plan calculations. T.e follo:ing infor!ation is for t.e pension plan for t.e e!ployees of Faul9? 8nc. ccu!ulated benefit obligation *ro(ected benefit obligation Fair #alue of plan assets >ar9et-related #alue of assets 2et EgainF or loss 6ettle!ent rate /0pected rate of return 12+31+)" L2?$))?))) 3?)4)?))) 3?)$)?))) 2?%6)?))) E425?)))F $N "N 12+31+)$ L3?"6)?))) 4?)))?))) 3?52)?))) 3?44)?))) E4$)?)))F $N 6N

Faul9 esti!ates t.at t.e a#erage re!aining ser#ice life is 15 years. Faul9@s contribution :as L52)?))) in 2))$ and benefits paid :ere L2$)?))). In!t#uct%on! EaF ,alculate t.e interest cost for 2))$. EbF ,alculate t.e actual return on plan assets in 2))$. EcF ,alculate t.e une0pected gain or loss in 2))$. EdF ,alculate t.e corridor for 2))$ and t.e a!orti'ation of t.e net gain for 2))$.

20 - 03 Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on So ut%on 20-922 EaF EbF L3?)4)?))) S $N B L243?2)) Fair #alue of plan assets E12+31+)$F Fair #alue of plan assets E1+1+)$F ,ontributions 7enefits paid ctual return on plan assets EcF ctual return Esee b.F /0pected return EL2?%6)?))) S 6NF 1ne0pected gain L3?52)?))) E3?)$)?)))F 44)?))) E52)?)))F 2$)?))) L 2))?))) L 2))?))) 1""?6)) L 22?4))

EdF

.1) S L2?%6)?))) B L2%6?)))G .1) S L3?)4)?))) B L3)4?))). T.e corridor is t.e larger? L3)4?))). L425?))) R L3)4?))) B L121?)))G L121?))) T 15 B L$?)6" a!orti'ation of net gain.

E@$ 20-920;*ension plan calculations and entries. 8nfor!ation about t.e pension plan of ,ro:n ,o. is as follo:sA ccu!ulated benefit obligation *ro(ected benefit obligation 1nrecogni'ed prior ser#ice cost Fair #alue of plan assets >ar9et-related #alue of assets *ension e0pense ,ontribution Discount rate Efor yearF 12+31+)" L4?"))?))) 4?$))?))) 1?$))?))) 4?65)?))) 4?%))?))) 1?)))?))) %$5?))) %N 12+31+)$ L4?%3)?))) 5?)2)?))) 1?6))?))) 4?$))?))) 4?%$)?))) 1?4))?))) 1?35)?))) $N

ccrued pension cost :as L1)?))) at Oanuary 1? 2))" and L25?))) at Oanuary 1? 2))$. In!t#uct%on! EaF D.at is t.e corridor for 2))$H EbF ,alculate t.e !ini!u! liability at Dece!ber 31? 2))$. EcF *repare entries for 2))$ to record t.e pension e0pense and contribution? and to record t.e pension liability. So ut%on 20-920 EaF EbF .1) S L4?$))?))) B L4$)?)))G .1) S L4?%))?))) B L4%)?))) T.e corridor is t.e larger? L4%)?))). ccu!ulated benefit obligation Fair #alue of plan assets >ini!u! liability L4?%3)?))) E4?$))?)))F L 13)?)))

ccounting for *ensions and *ostretire!ent 7enefits So ut%on 20-920 Econt.F EcF *ension /0pense.......................................................................... 1?4))?))) *repaid+ ccrued *ension ,ost......................................... ,as.................................................................................. 8ntangible sset;Deferred *ension ,ost.................................... dditional *ension 4iability............................................... >ini!u! liability L13)?))) ccrued pension cost? 1+1+)$ L25?))) ccrued 2))$ 5)?))) E"5?)))F dditional liability L 55?))) 55?)))

20 - 0:

5)?))) 1?35)?))) 55?)))

E@$ 20-923;,orridor a!orti'ation. /0plain corridor a!orti'ation.

So ut%on 20-923 T.e F 67 in#ented t.e corridor approac. for a!orti'ing pension plan gains and losses :.en t.ey get too large. T.e unrecogni'ed net gain or loss gets too large :.en it e0ceeds t.e arbitrarily selected criterion of 1)N of t.e larger of t.e beginning balances of t.e pro(ected benefit obligation or t.e !ar9et-related asset #alue. ny syste!atic !et.od of a!orti'ing t.e e0cess unrecogni'ed gain or loss !ay be used but it cannot be less t.an t.e a!ount co!puted using t.e straig.t-line o#er t.e a#erage re!aining ser#ice-life of all acti#e e!ployees.

E@$ 20-92:;,orridor approac. a!orti'ation of net gains and losses. Panna ,o!pany .as 2)) e!ployees :.o are e0pected to recei#e benefits under t.e co!pany@s defined-benefit pension plan. T.e total nu!ber of ser#ice-years of t.ese e!ployees is 2?))). T.e actuary for t.e co!pany@s pension plan calculated t.e follo:ing net gains and lossesA For t.e -ear /nded Dece!ber 31 2))" 2))$ 2))% E3ainF 5r 4oss L66)?))) E5%4?)))F %%)?)))

*rior to 2))"? t.ere :as no unrecogni'ed net gain or loss. 8nfor!ation about t.e co!pany@s pro(ected benefit obligation and !ar9et-related asset #alues follo:sA s of Oanuary 1 2))" 2))$ 2))% *ro(ected benefit obligation L2?1))?))) L2?34)?))) L2?%4)?))) >ar9et-related asset #alues 1?6$)?))) 2?46)?))) 2?55)?)))

20 - 0; Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on E@$ 20-92: cont.F In!t#uct%on! 7ased on t.e abo#e infor!ation about Panna ,o!pany? prepare a sc.edule :.ic. reflects t.e a!ount of unrecogni'ed net gain or loss to be a!orti'ed by t.e co!pany as a co!ponent of pension e0pense for t.e years 2))"? 2))$? and 2))%. T.e co!pany a!orti'es unrecogni'ed net gains or losses using t.e straig.t-line !et.od o#er t.e a#erage ser#ice life of participating e!ployees.

So ut%on 20-92: ,orridor Test and 3ain+4oss !orti'ation 6c.edule 7eginning of -ear ,u!ulati#e *75 *lan ssets ,orridor E3ainF 5r 4oss 2))" L2?1))?))) L1?6$)?))) L21)?))) L -)2))$ 2?34)?))) 2?46)?))) 246?))) 66)?))) 2))% 2?%4)?))) 2?55)?))) 2%4?))) 24?6))<< #erage 6er#ice -ears B 2?))) T 2)) B 1) years <L66)?))) R L246?))) B L414?))) T 1) B L41?4)) <<L66)?))) R L5%4?))) R L41?4)) B L24?6)).

!orti'ation L -)41?4))< -)-

E@$ 20-92;;*ension plan calculations and (ournal entry. 5n Oanuary 1? 2))$? 6tine ,o. .ad t.e follo:ing balancesA *ro(ected benefit obligation Fair #alue of plan assets 5t.er data related to t.e pension plan for 2))$A 6er#ice cost 1nrecogni'ed prior ser#ice cost ,ontributions to t.e plan 7enefits paid ctual return on plan assets 6ettle!ent rate /0pected rate of return 315?))) -)45%?))) 45)?))) 432?))) %N 6N L"?2))?))) "?2))?)))

In!t#uct%on! EaF Deter!ine t.e pro(ected benefit obligation at Dece!ber 31? 2))$. T.ere are no net gains or losses. EbF Deter!ine t.e fair #alue of plan assets at Dece!ber 31? 2))$. EcF ,alculate pension e0pense for 2))$. EdF *repare t.e (ournal entry to record pension e0pense and t.e contributions for 2))$.

ccounting for *ensions and *ostretire!ent 7enefits So ut%on 20-92; EaF *ro(ected benefit obligation? Oanuary 1 6er#ice cost 8nterest cost E%N S L"?2))?)))F 7enefits paid *ro(ected benefit obligation? Dece!ber 31 Fair #alue of plan assets? Oanuary 1 ctual return ,ontributions 7enefits paid Fair #alue of plan assets? Dece!ber 31 6er#ice cost 8nterest cost E%N S L"?2))?)))F ctual return on plan assets *ension e0pense L"?2))?))) 315?))) 64$?))) E45)?)))F L"?"13?))) L"?2))?))) 432?))) 45%?))) E45)?)))F L"?641?))) L315?))) 64$?))) E432?)))F L531?))) 531?)))

20 - 0<

EbF

EcF

EdF

*ension /0pense.......................................................................... ccrued+*repaid *ension ,ost......................................... ,as..................................................................................

"2?))) 45%?)))

?E@$ 20-92<;,o!puting and recording postretire!ent e0pense. T.e follo:ing infor!ation is related to t.e Pig.t ,o. postretire!ent benefits plan for 2))$A 6er#ice cost L16$?))) Discount rate 1)N /*75? Oanuary 1? 2))$ $2)?))) *75? Oanuary 1? 2))$ 64)?))) 1nrecogni'ed transition a!ount a!orti'ation 32?$)) ctual return on plan assets in 2))$ 22?4)) /0pected return on plan assets in 2))$ 2%?))) ,ontributions EfundingF 224?))) In!t#uct%on! EaF ,o!pute t.e a!ount of postretire!ent e0pense for 2))$. E6.o: co!putations.F EbF *repare t.e (ournal entry to record postretire!ent e0pense and Pig.t@s contributions for 2))$.

?So ut%on 20-92< EaF 6er#ice cost 8nterest cost E1)N S L64)?)))F !orti'ation of transition a!ount ctual return on plan assets 1ne0pected loss *ostretire!ent e0pense;2))$ *ostretire!ent /0pense............................................................... ,as. ................................................................................ *repaid+ ccrued ,ost ...................................................... L16$?))) 64?))) 32?$)) E22?4))F E6?6))F L235?$)) 235?$)) 224?))) 11?$))

EbF

20 - 0= Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on ?E@$ 20-92=;,o!puting postretire!ent e0pense and *75. T.e follo:ing infor!ation is related to t.e postretire!ent benefits plan of 3ordon? 8nc. for 2))$A 6er#ice cost L 2$)?))) Discount rate $N *75? Oanuary 1? 2))$ 2?1))?))) /*75? Oanuary 1? 2))$ 2?4))?))) ctual return on plan assets in 2))$ 1)4?))) /0pected return on plan assets in 2))$ %5?6)) !orti'ation of unrecogni'ed transition a!ount 1)"?2)) !orti'ation of unrecogni'ed net gain "?2)) ,ontributions EfundingF 4))?))) 7enefit pay!ents 2)$?))) In!t#uct%on! EaF ,o!pute t.e a!ount of postretire!ent e0pense for 2))$. E6.o: co!putations.F EbF ,o!pute t.e a!ount of t.e *75 at Dece!ber 31? 2))$.

?So ut%on 20-92= EaF 6er#ice cost 8nterest cost E$N S L2?1))?)))F ctual return on plan assets 1ne0pected gain !orti'ation of transition a!ount !orti'ation of net gain *ostretire!ent e0pense;2))$ *75? Oanuary 1? 2))$ 6er#ice cost 8nterest cost 7enefit pay!ents *75? Dece!ber 31? 2))$ L2$)?))) 16$?))) E1)4?)))F $?4)) 1)"?2)) E"?2))F L452?4)) L2?1))?))) 2$)?))) 16$?))) E2)$?)))F L2?34)?)))

EbF

ccounting for *ensions and *ostretire!ent 7enefits

20 - 0>

PROBLEMS
P#$ 20-92>;>easuring? recording? and reporting pension e0pense and liability. /c9ert? 8nc. on Oanuary 1? 2))$ initiated a noncontributory? defined-benefit pension plan t.at grants benefits to its 1)) e!ployees for ser#ices rendered in years prior to t.e adoption of t.e pension plan. T.e total e0pected ser#ice-years of t.e 1)) e!ployees :.o are e0pected to recei#e benefits under t.e plan is 1?2)). n actuarial consulting fir! .as indicated t.at t.e present #alue of t.e pro(ected benefit obligation on Oanuary 1? 2))$ :as L5?)4)?))). 5n Dece!ber 31? 2))$ t.e follo:ing infor!ation :as pro#ided concerning t.e pension plan@s operations for its first year. /!ployer@s contribution at end of year L1?6))?))) 6er#ice cost 6))?))) ccu!ulated benefit obligation 5?)%)?))) *ro(ected benefit obligation 6?)))?))) *lan assets Eat fair #alueF 1?6))?))) >ar9et-related asset #alue 1?6))?))) /0pected return on plan assets %N 6ettle!ent rate $N In!t#uct%on! EaF D.at is t.e prior ser#ice cost at Oanuary 1? 2))$H EbF ,o!pute t.e pension e0pense recogni'ed in 2))$. ssu!e t.e prior ser#ice cost is a!orti'ed o#er t.e a#erage re!aining ser#ice life of t.e e!ployees. EcF *repare t.e (ournal entries to reflect accounting for t.e co!pany@s pension plan for t.e year ended Dece!ber 31? 2))$. EdF 8ndicate t.e a!ounts t.at are reported on t.e inco!e state!ent and t.e balance s.eet for 2))$. So ut%on 20-92> EaF EbF L3?"$)?))). 6er#ice cost 8nterest on pro(ected benefit obligation EL5?)4)?))) S $NF !orti'ation of prior ser#ice cost< *ension e0pense;2))$ <1?2)) ;;; B 12 years a#erage re!aining ser#ice life 1)) L5?)4)?))) ;;;;; B L42)?))) 12 EcF *ension /0pense......................................................................... 1?423?2)) *repaid *ension ,ost................................................................... 1"6?$)) ,as.................................................................................. L 6))?))) 4)3?2)) 42)?))) L1?423?2))

1?6))?)))

8ntangible sset;Deferred *ension ,ost.................................... 3?666?$))< dditional *ension 4iability............................................... 3?666?$))

20 - 30 Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on So ut%on 20-92> Econt.F < ccu!ulated benefit obligation *lan assets Eat fair #alueF 1nfunded accu!ulated benefit obligation *repaid pension cost dditional pension liability EdF 8nco!e state!ent *ension /0pense 7alance s.eet 8ntangible sset;Deferred *ension ,ost ccrued *ension ,ost EL5?)%)?)))F 1?6))?))) E3?4%)?)))F 1"6?$)) EL3?666?$))F L1?423?2)) L3?666?$)) L3?4%)?)))

P#$ 20-900;>easuring and recording pension e0pense. *resented belo: is infor!ation related to t.e pension plan of Vector 8nc. for t.e year 2))$. 1. T.e ser#ice cost of pension e0pense is L24)?))) using t.e pro(ected benefits approac.. 2. T.e pro(ected benefit obligation and t.e accu!ulated benefit obligation at t.e beginning of t.e year are L3))?))) and L2$)?)))? respecti#ely. T.e e0pected return on plan assets is %N and t.e settle!ent rate is 1)N 3. T.e unrecogni'ed prior ser#ice cost at t.e beginning of t.e year is L14)?))). T.e co!pany .as a :or9force of 2)) e!ployees? all :.o are e0pected to recei#e benefits under t.e plan. T.e total nu!ber of ser#ice-years is 1?))) and t.e ser#ice-years attributable to 2))$ is 2)). T.e co!pany .as decided to use t.e years-of-ser#ice !et.od of a!orti'ation for t.ese costs. 4. t t.e beginning of t.e period? t.e !ar9et-related asset #alue :as L2$)?))) and t.e fair #alue of pension plan assets? L2$4?))). T.e co!pany .ad an unrecogni'ed net loss at t.e beginning of t.e period of L%)?))). ny a!orti'ation of unrecogni'ed net loss is recogni'ed on a straig.t-line basis o#er t.e a#erage re!aining ser#ice-life of t.e e!ployees.

5. T.e contribution !ade to t.e pension fund in 2))$ :as L231?))). In!t#uct%on! EaF Deter!ine t.e pension e0pense to be reported on t.e inco!e state!ent for 2))$. E&ound all co!putations to nearest dollar.F EbF *repare t.e (ournal entryEiesF to record pension e0pense for 2))$.

So ut%on 20-900 EaF 6er#ice cost Epro(ected benefits approac.F 8nterest on pro(ected benefit obligation E1)N S L3))?)))F /0pected return on plan assets E%N S L2$)?)))F !orti'ation of prior ser#ice cost E1F !orti'ation of loss E2F *ension e0pense L24)?))) 3)?))) E25?2))F 2$?))) 12?))) L2$4?$))

ccounting for *ensions and *ostretire!ent 7enefits So ut%on 20-900 Econt.F E1F L14)?))) ;;;; B L14) 1?))) 2)) S L14) B L2$?))) E2F >ar9et-related asset #alue L2"6?))) 1)N L 2"?6)) L3))?))) 1)N L 3)?))) EL %)?)))F 3)?))) EL 6)?)))F

20 - 39

*ro(ected benefit obligation

2et loss Ebeginning of periodF Pig.er of 1)N of pro(ected benefit obligation or !ar9et-related asset #alue !ount to be a!orti'ed 1?))) /0pected Future -ears of 6er#ice ;;; B ;;;;;;;;;;;;;;; B 5 years 2)) 2u!ber of /!ployees L6)?))) ;;;; B L12?))) 5 years EbF *ension /0pense.......................................................................... *repaid+ ccrued *ension ,ost............................................ ,as.....................................................................................

2$4?$)) 53?$)) 231?)))

P#$ 20-909;*reparing a pension :or9 s.eet. T.e accountant for Oar#is ,orporation .as de#eloped t.e follo:ing infor!ation for t.e co!pany@s defined-benefit pension plan for 2))$A 6er#ice cost L5))?))) ctual return on plan assets 26)?))) nnual contribution to t.e plan %))?))) !orti'ation of unrecogni'ed prior ser#ice cost 1)5?))) 7enefits paid to retirees 6)?))) 6ettle!ent rate 1)N /0pected rate of return on plan assets $N T.e accu!ulated benefit obligation at Dece!ber 31? 2))$? a!ounted to L4?25)?))). In!t#uct%on! EaF 1sing t.e abo#e infor!ation for Oar#is ,orporation? co!plete t.e pension :or9 s.eet for 2))$. 8ndicate EcreditF entries by parent.eses. ,alculated a!ounts s.ould be supported. EbF *repare t.e (ournal entries to reflect t.e accounting for t.e co!pany@s pension plan for t.e year ending Dece!ber 31? 2))$.

P#$ 20-909 Econt.F

Oar#is ,orporation *ension Dor9 6.eet;2))$ ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 3eneral Oournal /ntries >e!o /ntries ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 1nrecog- 1nrecogni'ed ni'ed nnual *repaid+ ddi*ro(ected *rior 2et *ension E ccruedF tional *ension 7enefit *lan 6er#ice E3ainF /0pense ,as. ,ost 4iability 8ntangible 5bligation ssets ,ost or 4oss ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 7al.? Dec. 31? 2))" E3"5?)))F E3?"5)?)))F 2?"5)?))) 625?))) ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 6er#ice ,ost ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 8nterest ,ost ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; ctual return ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 1ne0pected gain+loss ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; !orti'ation of *6, ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; ,ontributions ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 7enefits ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 1nrecogni'ed gain+loss a!ort. ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; >ini!u! liability ad(ust!ent Oournal entry for 2))$ 7alance? Dec. 31? 2))$

So ut%on 20-909

Oar#is ,orporation *ension Dor9 6.eet;2))$ ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 3eneral Oournal /ntries >e!o /ntries ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 1nrecog- 1nrecogni'ed ni'ed nnual *repaid+ ddi*ro(ected *rior 2et *ension E ccruedF tional *ension 7enefit *lan 6er#ice E3ainF /0pense ,as. ,ost 4iability 8ntangible 5bligation ssets ,ost or 4oss ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 7al.? Dec. 31? 2))" E3"5?)))F E3?"5)?)))F 2?"5)?))) 625?))) ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 6er#ice ,ost 5))?))) E5))?)))F ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 8nterest ,ost E1F 3"5?))) E3"5?)))F ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; ctual return E26)?)))F 26)?))) ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 1ne0pected gain+loss E2F 4)?))) E4)?)))F ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; !orti'ation of *6, 1)5?))) E1)5?)))F ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; ,ontributions E%))?)))F %))?))) ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 7enefits 6)?))) E6)?)))F ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; 1nrecogni'ed gain+loss a!ort. ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;; >ini!u! liability ad(ust!ent E3F E165?)))F 165?))) Oournal entry for 2))$ "6)?))) E%))?)))F 14)?))) 7alance? Dec. 31? 2))$ E235?)))F E165?)))F 165?))) E4?565?)))F 3?$5)?))) 52)?))) E4)?)))F

ccounting for *ensions and *ostretire!ent 7enefits

20 - 33 Te!t Ban& 'o# Inte#(e)%ate Account%n*+ T"e 't, E)%t%on So ut%on 20-909 Econt.F E1F E2F E3F L3?"5)?))) S 1)N B L3"5?))) L26)?))) R EL2?"5)?))) S $NF B L4)?))) ccu!ulated 7enefit 5bligation *lan assets at fair #alue 1nfunded accu!ulated benefit *repaid+ ccrued *ension ,ost dditional liability LE4?25)?)))F 3?$5)?))) E4))?)))F 235?))) L E165?)))F

>ini!u! 4iability

EbF

*ension /0pense.......................................................................... *repaid+ ccrued *ension ,ost..................................................... ,as.................................................................................. 8ntangible sset;Deferred *ension ,ost.................................... dditional *ension 4iability...............................................

"6)?))) 14)?))) %))?))) 165?))) 165?)))

P#$ 20-902; !orti'ation of prior ser#ice cost using years-of-ser#ice !et.od. 5n Oanuary 1? 2))"? Quayle 8ncorporated a!ended its pension plan :.ic. caused an increase of L6?)))?))) in its pro(ected benefit obligation. T.e co!pany .as 4)) e!ployees :.o are e0pected to recei#e benefits under t.e co!pany@s defined-benefit pension plan. T.e personnel depart!ent pro#ided t.e follo:ing infor!ation regarding e0pected e!ployee retire!entsA 2u!ber of /!ployees 4) 12) 6) 16) 2) 4)) /0pected &etire!ents 5n Dece!ber 31 2))" 2))$ 2))% 2)1) 2)11

T.e co!pany plans to use t.e years-of-ser#ice !et.od in calculating t.e a!orti'ation of unrecogni'ed prior ser#ice cost as a co!ponent of pension e0pense. In!t#uct%on! *repare a sc.edule :.ic. s.o:s t.e a!ount of annual prior ser#ice cost a!orti'ation t.at t.e co!pany :ill recogni'e as a co!ponent of pension e0pense fro! 2))" t.roug. 2)11.

ccounting for *ensions and *ostretire!ent 7enefits So ut%on 20-902 ,o!putation of 6er#ice--ears -ear 2))" 2))$ 2))% 2)1) 2)11 4) 12) 12) 6) 6) 6) 1$) 16) 16) 16) 16) 64) 2) 2) 2) 2) 2) 1)) Total 4)) 36) 24) 1$) 2) 1?2))

20 - 3:

4)

24)

,ost *er 6er#ice -earA L6?)))?))) T 1?2)) B L5?))). Quayle 8ncorporated ,o!putation of nnual *rior 6er#ice ,ost !orti'ation -ear 2))" 2))$ 2))% 2)1) 2)11 Total 6er#ice--ears 4)) 36) 24) 1$) 2) 1?2)) ,ost *er 6er#ice--ear L5?))) 5?))) 5?))) 5?))) 5?))) nnual !orti'ation L2?)))?))) 1?$))?))) 1?2))?))) %))?))) 1))?))) L6?)))?)))