Accounting For Pensions

15 Questions | Total Attempts: 242

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Accounting Quizzes & Trivia

Pensions in accounting are seen as future liabilities. They are seen as actions that will reduce the company’s capital when they fall due. We have covered how they are calculated and treated in the books of accounts. Test your understanding of this liability by taking the simple quiz below. Good luck!


Questions and Answers
  • 1. 
    Companies generally design pension plans that are
    • A. 

      Noncontributory

    • B. 

      Contributory

    • C. 

      Qualified

    • D. 

      Insured

  • 2. 
    The employer's pension expense is the amount that it is obligated to pay to the pension trust in
    • A. 

      A defined benefit plan

    • B. 

      A defined contribution plan

    • C. 

      Both of the above

    • D. 

      None of these

  • 3. 
    In a defined benefit plan, the funding level depends on the all the following factors except
    • A. 

      Compensation levels

    • B. 

      Interest earnings

    • C. 

      Age of the employer company

    • D. 

      Turnover

  • 4. 
    A measure of an employer's pension obligation using future salary levels is the
    • A. 

      Accumulated benefit obligation

    • B. 

      Defined benefit obligation

    • C. 

      Projected benefit obligation

    • D. 

      Vested benefit obligation

  • 5. 
    Which of the following is not a component of pension expense?
    • A. 

      Actual return on plan assets

    • B. 

      Amortization of prior service cost

    • C. 

      Amortization of projected benefit obligation

    • D. 

      Gain or Loss

  • 6. 
    All of the following increase pension expense except
    • A. 

      Service cost

    • B. 

      Interest on the liability

    • C. 

      Amortization of prior service cost

    • D. 

      All of these

  • 7. 
    Which of the following does the FASB argue indicates a more realistic measure of the employer's obligation under the pension plan on a going concern basis and should be used as the basis for determining service cost?
    • A. 

      Vested benefit obligation

    • B. 

      Projected benefit obligation

    • C. 

      Accumulated benefit obligation

  • 8. 
    Which of the following results from unexpected decreases in the pension obligation?
    • A. 

      Asset gains

    • B. 

      Asset losses

    • C. 

      Liability gains

    • D. 

      Liability losses

  • 9. 
    Which one of the following statements related to unexpected gains and losses is not correct?
    • A. 

      Asset gains occur when the actual return is greater than the expected return.

    • B. 

      Asset gains and losses are recorded in an Unrecognized Net Gain or Loss account

    • C. 

      Liability gains result from unexpected decreases in the projected benefit obligation balance

    • D. 

      Liability gains are deferred but liability losses are recognized in the year they occur.

  • 10. 
    The recognized net gain or loss balance must be amortized when it exceeds 10% of the larger of the
    • A. 

      Beginning accumulated benefit obligation or the market related asset value

    • B. 

      Ending accumulated benefit obligation or the market related asset value

    • C. 

      Beginning projected benefit obligation or the market related asset value

    • D. 

      Ending projected benefit obligation or the market related asset value

  • 11. 
    Which of the following losses should be recognized immediately?
    • A. 

      Asset losses

    • B. 

      Liability losses

    • C. 

      Asset losses and liability losses

    • D. 

      Losses that arise from a single occurrence such as a plant closing

  • 12. 
    The minimum liability is the difference between the
    • A. 

      Accumulated benefit obligation and the market related asset value

    • B. 

      Accumulated benefit obligation and the fair value of plan assets

    • C. 

      Projected benefit obligation and the market related asset value

    • D. 

      Projected benefit obligation and the fair value of plan assets

  • 13. 
    All of the following pension information should be disclosed in the notes to the financial statements except
    • A. 

      The expected benefit payments to be paid to current plan participants for each of the next fiver fiscal years

    • B. 

      A company's best estimate of expected contributions to be paid to the plan during the next year

    • C. 

      A reconciliation showing how the projected benefit obligation and the fiar value of the plan assets changed from the beginning to the end of the period

    • D. 

      All of the options are disclosed

  • 14. 
    When the additional liability exceeds the unrecognized prior service cost
    • A. 

      No entry is necessary to record the liability

    • B. 

      The additional pension liability account is decreased

    • C. 

      The excess is debited to a contra equity account

  • 15. 
    All of the following statements regarding theaccounting for various forms of compensation plans under iGAPP are true except
    • A. 

      IGAPP does not recognize prior service costs on the balance sheet

    • B. 

      For defined benefit plans, iGAAP companies have the choice of recognizing acturial gains and losses in income immediately or amortizing them over the expected remaining working lives of employees

    • C. 

      In order to dampen and in some cases fully eliminate the fluctuations in pension expenses, iGAAP uses smoothing provisions

    • D. 

      IGAAP does not separate pension plans into defined contribution plans and defined benefit plans