In accounting for a defined-benefit pension plan __the expense recognized each period is equal to the cash contribution. ___the liability is determined based upon known variables that reflect future salary levels promised to employees. __the employer's responsibility is simply to make a contribution each year based on the
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In accounting for a defined-benefit pension plan
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- The actuarial present value of all the benefits attributed by the pension benefit formula to employee service rendered before a specified date based on expected future compensation levels is the: a. projected benefit obligation b. prior service cost c. service cost d. accumulated benefit obligationIn determining the present value of the prospective benefits (often referred to as the defined benefit obligation), the following are considered by the actuary: retirement and mortality rate. interest rates. benefit provisions of the plan. all of these factors. In accounting for a defined-benefit pension plan an appropriate funding pattern must be established to ensure that enough monies will be available at retirement to meet the benefits promised. the employer's responsibility is simply to make a contribution each year based on the formula established in the plan. the expense recognized each period is equal to the cash contribution. the liability is determined based upon known variables that reflect future salary levels promised to employees. Alternative methods exist for the measurement of the pension obligation (liability). Which measure requires the use of future salaries in its computation? Vested benefit obligation Accumulated benefit obligation Defined benefit…In a defined contribution plan, a formula is used that: Ensures that pension expense and the cash funding will be different Requires an employer to contribute a certain sum each period based on the formula Defines the benefits that the employee will receive at the time of retirement Ensures that the employer is at risk to make sure funds are available at retirement
- The accumulated benefit obligation measures __the shortest possible period for funding to maximize the tax deduction. __the pension obligation on the basis of the plan formula applied to years of service to date and based on future salary levels. __the level cost that will be sufficient, together with interest to provide the total benefits at retirement. __the pension obligation on the basis of the plan formula applied to years of service to date and based on existing salary levels.34. In a defined-contribution plan, a formula is used that defines the benefits that the employee will receive at the time of retirement. requires an employer to contribute a certain sum each period based on the formula. ensures that employers are at risk to make sure funds are available at retirement. ensures that pension expense and the cash funding amount will be different.Defined contribution plans and defined benefits plans are two common types of pension plans.choose the correct statement concerning these plans: a.The required annual contribution to the plan is determined by a formula or contract in a defined contribution plan b.both plans provide the same retirement benefits c.the retirement benefit is usually determinable well before retirement in a defined contribution plan d.In both types of plans,pension expenses is generally the amount funded during the year
- Based upon this information, how would I make the following journal entries? Record annual pension expense. Record the change in plan assets. Record the change in the PBO. Record the cash contribution to plan assets. Record the retiree benefits paid.Indicate by letter whether each of the events listed below increases (I), decreases (D), or has no effect (N) on an employer's periodic pension expense in the year the event occurs. Events 1. Interest cost. _____ 2. Amortization of prior service cost---AOCI. ______ 3.Excess of the expected return on plan assets over the actual return _____ 4. Expected return on plan assets. _____ 5. A plan amendment that increases benefits is made retroactive to prior years. ____ 6. Actuary's estimate of the PBO is increased.…In pension accounting, the employer's net pension liability: A. Is the amount the government intends to contribute within 30 days after yearend to the pension plan. B. Is based on actuarial valuations generally required to be performed at least every five years. C. Represents the portion of the present value of projected benefit payments to be provided through the pension plan to current active and inactive employees that is attributed to those employees' past periods of service. D. Is measured as the total pension liability less the amount of fiduciary net position held for future pension payments.
- Carson Company sponsors a single-employer defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation. Among the components that should be included in the calculation net pension cost are service cost, interest cost, and actual return on plan assets. Required: A. What two accounting problems result from the nature of the defined benefit pension plan? Why do those problems arise? B. How should Carson determine service cost component of the net pension cost? C. How should Carson determine the interest cost component of the net pension cost? D. How should Carson determine the actual return on plan assets component of the net pension cost?S1: Under a defined contribution plan, the amount of a participant’s future benefits is determined by the contributions paid by the employer, the participant, or both, and the operating efficiency and investment earnings of the fund. S2: Under a defined benefit plan, the payment of promised retirement benefits depends on the financial position of the plan and the ability of contributors to make future contributions to the plan as well as the investment performance and operating efficiency of the plan. Only S1 is true None is true Only S2 is true Both are truePlease answer the following questions about defined benefit pension plans: Companies with defined benefit pension plans must recognize pension expenses each period. What are the five components of pension expense? Briefly describe each component. How does each component of pension expense affect pension expense during the period (increase, decrease, or uncertain)? What is the difference between the accumulated pension obligation and the projected pension obligation? What determines whether a pension plan is underfunded or overfunded?