ACC 222 Exam 3 Practice
Practice Exam 3
A net gain or loss affects the pension expense only if it exceeds an amount
equal to what percentage of the PBO or plan assets, whichever is higher?
5%.
10%.
15%.
20%.
A statement of comprehensive income does not include:
Gains from the return on pension assets exceeding expectations.
Gains and losses on unsold held-to-maturity securities.
Losses from the return on pension assets falling short of expectations.
Prior service cost.
Actuarial gains and losses are reported as OCI as they occur using:
U.S. GAAP.
IFRS.
Both U.S. GAAP and IFRS.
Neither U.S. GAAP nor IFRS.
Amortizing prior service cost for pension plans will:
Increase retained earnings and increase accumulated other
comprehensive income.
Decrease retained earnings and decrease accumulated other
comprehensive income.
Increase retained earnings and decrease accumulated other
comprehensive income.
ACC 222 Exam 3 Practice
,ACC 222 Exam 3 Practice
Decrease retained earnings and increase accumulated other
comprehensive income.
An underfunded pension plan means that the:
PBO is less than plan assets.
PBO exceeds plan assets.
ABO is less than plan assets.
ABO exceeds plan assets.
Assume that at the beginning of the current year, a company has a net gain-
AOCI of $60,000,000. At the same time, assume the PBO and the plan assets
are $300,000,000 and $450,000,000, respectively. The average remaining
service period for the employees expected to receive benefits is 10 years.
What is the amount of amortization to pension expense for the year?
$6,000,000.
$15,000,000.
$1,500,000.
$7,500,000.
[$60,000,000 − ($450,000,000 × 10%)]/10 = $1,500,000
In a defined benefit pension plan, the journal entry to record benefits paid to
retired employees will include:
a debit to projected benefit obligation
a debit to plan assets
a credit to retiree benefits
a credit to cash
ACC 222 Exam 3 Practice
, ACC 222 Exam 3 Practice
If a pension plan is underfunded, the company has a net loss-OCI.
True
False
Gains and losses can occur with pension plans when:
Either the PBO or the return on plan assets turns out to be
different than expected.
Either the ABO or the return on plan assets turns out to be different than
expected.
Either the PBO, the ABO, or the return on plan assets turns out to be
different than expected.
Either the PBO or the ABO turns out to be different than expected.
Eligibility for postretirement health care benefits usually is based on the
employee's:
Job title.
Number of years in the profession.
Number of years in the current position.
Age and/or years of service.
Castillo Company has a defined benefit pension plan. At the end of the
reporting year, the following data were available: beginning PBO, $75,000;
service cost, $18,000; interest cost, $5,000; benefits paid for the year,
$9,000; ending PBO, $89,000; the expected return on plan assets, $10,000;
and cash deposited with pension trustee, $17,000. There were no other
pension-related costs. The journal entry to record the annual pension costs
will include a credit to the PBO for:
ACC 222 Exam 3 Practice
