Analyzing and Interpreting Pension Disclosures-Plan Assets and Cash Flow YUM! Brands Inc. discloses the following pension footnote in its 10-K report. Pension Plan Assets ($ millions) Fair value of plan assets at beginning of year Actual return on plan assets... Employer contributions.. Benefits paid..... Fair value of plan assets at end of year 2018 $864 (49) 13 (73) $755 a. How does the "actual return on plan assets" of $(49) million affect YUM!'s reported profits for 2018? b. YUM! Brands contributed $13 million cash to the pension plan investment account (asset) during the year. Which of the following is true? i. YUM! recognized the $13 million cash payment as a pension expense in 2018. ii. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 because it is not tax deductible. iii. YUM! did not recognize the 13 million cash payment as a pension expense in 2018 because it relates to employees' service in prior periods. iv. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 be- cause benefits of $73 million were paid to employees and that amount represents the pension expense. v. None of the above. c. YUM!'s pension plan paid out $73 million in benefits during 2018. How is this payment reported?
Analyzing and Interpreting Pension Disclosures-Plan Assets and Cash Flow YUM! Brands Inc. discloses the following pension footnote in its 10-K report. Pension Plan Assets ($ millions) Fair value of plan assets at beginning of year Actual return on plan assets... Employer contributions.. Benefits paid..... Fair value of plan assets at end of year 2018 $864 (49) 13 (73) $755 a. How does the "actual return on plan assets" of $(49) million affect YUM!'s reported profits for 2018? b. YUM! Brands contributed $13 million cash to the pension plan investment account (asset) during the year. Which of the following is true? i. YUM! recognized the $13 million cash payment as a pension expense in 2018. ii. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 because it is not tax deductible. iii. YUM! did not recognize the 13 million cash payment as a pension expense in 2018 because it relates to employees' service in prior periods. iv. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 be- cause benefits of $73 million were paid to employees and that amount represents the pension expense. v. None of the above. c. YUM!'s pension plan paid out $73 million in benefits during 2018. How is this payment reported?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:M10-18. Analyzing and Interpreting Pension Disclosures-Plan Assets and Cash Flow
YUM! Brands Inc. discloses the following pension footnote in its 10-K report.
Pension Plan Assets ($ millions)
Fair value of plan assets at beginning of year
Actual return on plan assets.
Employer contributions
Benefits paid..
Fair value of plan assets at end of year.
2018
$864
(49)
13
(73)
$755
a. How does the "actual return on plan assets" of $(49) million affect YUM!'s reported profits for 2018?
b. YUM! Brands contributed $13 million cash to the pension plan investment account (asset) during
the year. Which of the following is true?
i. YUM! recognized the $13 million cash payment as a pension expense in 2018.
ii. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 because
it is not tax deductible.
iii. YUM! did not recognize the 13 million cash payment as a pension expense in 2018 because it
relates to employees' service in prior periods.
iv.
YUM! did not recognize the $13 million cash payment as a pension expense in 2018 be-
cause benefits of $73 million were paid to employees and that amount represents the pension
expense.
v. None of the above.
c. YUM!'s pension plan paid out $73 million in benefits during 2018. How is this payment reported?
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