Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Chapter 17, Problem 17.3Q
To determine
Pension plan: This is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.
Types of pension plans:
- Defined contribution pension plans: In such plans, employers contribute fixed amounts annually, to the pension fund. The benefit amounts are based on size of pension fund available at the time of retirement. There is no commitment on the part of the employers to pay fixed retirement benefits.
- Defined benefit pension plans: In such plans, employers pay annual fixed contributions to employees as retirement benefits. Employers promise to pay fixed retirement benefits, which are computed based on the service period of employee, annual compensation of the employee, and age.
To indicate: The type of pension plan established by Corporation L
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What is a pension plan? What motivates a corporation to offer a pension plan for its employees?
1. Which of the following statements typifies defined contribution plans?
Investment risk is borne by the corporation sponsoring the plan.
O Retirement benefit is defined by a pension formula
O The plans are more complex than defined benefit plans.
O The employer's obligation is satisfied by making the periodic contribution to the plan.
Which of the following is not a characteristic of a defined-contribution pension plan?
The employer's contribution each period is fixed.
If the employer does not make contribution in full, then it reports a pension liability. If the employer contributes more than the required amount, then it reports a pension asset.
An appropriate funding pattern must be established to ensure that the promised benefits at employees’ retirement will be met.
The benefit of gain or the risk of loss from the assets contributed to the pension fund are borne by the employee.
Chapter 17 Solutions
Intermediate Accounting
Ch. 17 - Prob. 17.1QCh. 17 - Prob. 17.2QCh. 17 - Prob. 17.3QCh. 17 - What is the vested benefit obligation?Ch. 17 - Prob. 17.5QCh. 17 - Prob. 17.6QCh. 17 - Name three events that might change the balance of...Ch. 17 - Prob. 17.8QCh. 17 - Prob. 17.9QCh. 17 - Prob. 17.10Q
Ch. 17 - The return on plan assets is the increase in plan...Ch. 17 - Define prior service cost. How is it reported in...Ch. 17 - Prob. 17.13QCh. 17 - Is a companys PBO reported in the balance sheet?...Ch. 17 - What two components of pension expense may be...Ch. 17 - Prob. 17.16QCh. 17 - Evaluate this statement: The excess of the actual...Ch. 17 - Prob. 17.18QCh. 17 - TFC Inc. revises its estimate of future salary...Ch. 17 - Prob. 17.20QCh. 17 - Prob. 17.21QCh. 17 - Prob. 17.22QCh. 17 - The components of postretirement benefit expense...Ch. 17 - The EPBO for Branch Industries at the end of 2018...Ch. 17 - Prob. 17.25QCh. 17 - Prob. 17.26QCh. 17 - Prob. 17.1BECh. 17 - Prob. 17.2BECh. 17 - Prob. 17.3BECh. 17 - Prob. 17.4BECh. 17 - Prob. 17.5BECh. 17 - Prob. 17.6BECh. 17 - Prob. 17.7BECh. 17 - Prob. 17.8BECh. 17 - Prob. 17.9BECh. 17 - Prob. 17.10BECh. 17 - Net gain LO176 The projected benefit obligation...Ch. 17 - Prob. 17.12BECh. 17 - Prob. 17.13BECh. 17 - Postretirement benefits; determine the APBO and...Ch. 17 - Prob. 17.15BECh. 17 - Prob. 17.1ECh. 17 - Prob. 17.2ECh. 17 - Prob. 17.3ECh. 17 - Prob. 17.4ECh. 17 - Prob. 17.5ECh. 17 - Prob. 17.6ECh. 17 - Prob. 17.7ECh. 17 - Prob. 17.8ECh. 17 - Prob. 17.9ECh. 17 - Prob. 17.10ECh. 17 - Prob. 17.11ECh. 17 - PBO calculations; ABO calculations; present value...Ch. 17 - Prob. 17.13ECh. 17 - Prob. 17.14ECh. 17 - Prob. 17.15ECh. 17 - Prob. 17.16ECh. 17 - Prob. 17.17ECh. 17 - Prob. 17.18ECh. 17 - Prob. 17.19ECh. 17 - Prob. 17.20ECh. 17 - Prob. 17.21ECh. 17 - Prob. 17.22ECh. 17 - Prob. 17.23ECh. 17 - Prob. 17.24ECh. 17 - Prob. 17.25ECh. 17 - Prob. 17.26ECh. 17 - Prob. 17.27ECh. 17 - Prob. 17.28ECh. 17 - Prob. 17.29ECh. 17 - Prob. 17.30ECh. 17 - Prob. 17.31ECh. 17 - Prob. 17.32ECh. 17 - Prob. 17.33ECh. 17 - Prob. 17.1PCh. 17 - PBO calculations; present value concepts LO173...Ch. 17 - Service cost, interest, and PBO calculations;...Ch. 17 - Prob. 17.4PCh. 17 - Prob. 17.5PCh. 17 - Prob. 17.6PCh. 17 - Determining the amortization of net gain LO176...Ch. 17 - Prob. 17.8PCh. 17 - Prob. 17.9PCh. 17 - Prob. 17.10PCh. 17 - Prob. 17.11PCh. 17 - Prob. 17.12PCh. 17 - Prob. 17.13PCh. 17 - Prob. 17.14PCh. 17 - Prob. 17.15PCh. 17 - Prob. 17.16PCh. 17 - Prob. 17.17PCh. 17 - Prob. 17.18PCh. 17 - Prob. 17.19PCh. 17 - Prob. 17.20PCh. 17 - Prob. 17.21PCh. 17 - Prob. 17.1BYPCh. 17 - Prob. 17.2BYPCh. 17 - Prob. 17.3BYPCh. 17 - Prob. 17.5BYPCh. 17 - Prob. 17.6BYPCh. 17 - Prob. 17.7BYPCh. 17 - Prob. 17.8BYPCh. 17 - Prob. 17.9BYPCh. 17 - Prob. 17.11BYPCh. 17 - Prob. 1CCTCCh. 17 - Prob. 1CCIFRS
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- Discuss the role that pension funds play in company pension plans. What benefits accrue to companies who elect to use pension funds? How does the use of a pension fund change the accounting that must be done with respect to employee pension amounts?arrow_forwardCullumber Company sponsors a defined benefit pension plan. The corporation's actuary provides the following information about the plan. Vested benefit obligation Accumulated benefit obligation Projected benefit obligation Plan assets (fair value) Settlement rate and expected rate of return Pension asset/liability Service cost for the year 2020 Contributions (funding in 2020) Benefits paid in 202- Actual return on the plan assets $ Net pension liability gains and losses $ (a) Compute the actual return on the plan assets in 2020. Net gain or loss amortization January 1, 2020 $1,640 (d) Compute pension expense for 2020. Pension expense 2,060 $ $ 2,390 1,770 620 230 December 31, 2020 $2,060 2,610 3,230 2,490 (b) Compute the amount of the other comprehensive income (G/L) as of December 31, 2020. (Assume the January 1, 2020, balance was zero.) (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) 10 % ? (c) Compute the amount of net gain or loss…arrow_forwardA company shows in its balance sheet, a provision for pension costs, Select one: a. This company has a defined benefit plan b. This company has a funded defined contribution plan c. This company has a defined contribution plan d. This company has a funded defined benefit planarrow_forward
- A company currently offers it’s employees a defined benefit pension plan, but is looking into changing to a defined contribution plan for new employees, the company reports under IFRS. Within the notes, there is reference to the following: in relation to the pension extract (a)• Net pension liabilities/asset • Employee service cost • Net interest expense/income• Remeasurements Explain what the main features are of a defined benefit and defined contribution pension plan and how they are included in the financial statements. With reference to the pension notes, describe each item and how any movement in those items would be recorded in the financial statements.arrow_forwardStark Inc. follows IFRS for financial reporting and has established a defined benefit pension plan for employees. Pertinent details for the year ended December 31, 20X5, are as follows: Stark Inc. follows IFRS for financial reporting and has established a defined benefit pension plan for employees. Pertinent details for the year ended December 31, 20X5, are as follows: Stark Inc. follows IFRS for financial reporting and has established a defined benefit pension plan for employees. Pertinent details for the year ended December 31, 20X5, are as follows: Current service cost accrued end of year $52,000 Past service cost accrued beginning of year $10,000 Benefits paid evenly throughout the year $85,000 Discount rate used by actuary 6% Actuarial losses in the year $10,000 Pension obligation as at January 1, 20X5 $650,000 Plan assets as at January 1, 20X5 $625,000 What is the balance of the pension obligation as at December 31, 20X5? a. $671,500 b. $654,050 c. $674,050 d. $673,450arrow_forwardAccording to PAS for Accounting and Reporting by Retirement Benefit Plans, which of the following may be disclosed in the financial report of a defined benefit plan but would not be shown in the financial report of a defined contribution plan? Actuarial present value of promised retirement benefits Employer contributions Government bonds held Employee contributionsarrow_forward
- _1. If a company has an underfunded defined-benefit pension plan: A. no payment may be made to retirees until the company deposits all the necessary assets into the pension fund. B. the difference between fund assets and amounts owed to retirees will still be paid by the federal Pension Benefit Guaranty Corporation. C. the value of the PBO must be precisely the same as the amount of assets set aside by the company to pay pension benefits. D. All the above are true. E. None of the above is true. 2. Which of the following is a TRUE sentence with regard to a defined-contribution pension plan? A. Both the employer and employee must make annual payments to the plan. B. It does not matter to the employee whether the company has a defined- benefit plan or a defined-contribution plan, because the employee still has retirement benefits. C. A 401(k) plan is an example of a defined-contribution plan. D. All the above are true. E. None of the above is true. _3. The Public Company Accounting…arrow_forwardIn a defined-benefit plan, a formula is used that Select one: a. requires that the benefit of gain or the risk of loss from the assets contributed to the pension plan be borne by the employee. b. requires that pension expense and the cash funding amount be the same. c. defines the contribution the employer is to make; no promise is made concerning the ultimate benefits to be paid out to the employees. d. defines the benefits that the employee will receive at the time of retirement.arrow_forwardThe two main types of pension plans are defined benefit plans and defined contribution plans. Explain the difference between the two. How does the accounting for each differ? With defined benefit plans, there are several levels of benefit obligations for the company. List these and describe what each represents. Which does GAAP require with recognition and why?arrow_forward
- A defined benefit plan is one in which: A.) The employer promises specified payments to employees on their retirement. B.)The specific provisions are defined by the Internal Revenue Code. C.) The specific provisions are defined by the Uniform Code of Retirement Plans. D.) The employee can specify the mix of benefits (e.g., health, pension, insurance) that will be received on retirement.arrow_forwardAn entity contributes to an industrial pension plan that provides a pension arrangement for its employees. A large number of other employers also contribute to the pension plan, and the entity makes contributions in respect of each employee. These contributions are kept separate from corporate assets and are used together with any investment income to purchase annuities for retired employees. The only obligation of the entity is to pay the annual contributions. This pension scheme is a ___. Defined benefit plan only Multiemployer plan and a defined benefit scheme Defined contribution plan only Multiemployer plan and a defined contribution schemearrow_forwardIn 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…arrow_forward
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