Question

The interest cost component of a defined benefit pension plan is computed as the:

Multiple Choice

• ending accrued pension liability times the discount rate.

• beginning accrued pension liability times the discount rate.

• beginning accumulated pension liability times the discount rate.

• beginning projected benefit obligation times the discount rate.

Which of the following is not a proper description of the pension Accumulated Benefit Obligation (ABO)?

Multiple Choice

• If the pension plan was frozen the company would only have to pay the ABO.

• The difference between the ABO and PBO represents the losses workers would suffer if they leave the company prior to retirement.

• The ABO may be used for balance sheet and income statement presentation under US GAAP.

• If excludes projected salary increases between the statement date and the employee’s expected retirement date.

A major difference between accounting for pension plans and accounting for other postretirement benefit plans is that:

Multiple Choice

• postretirement benefit plans other than pensions are not required to be funded.

• postretirement benefit plans other than pensions do not deduct the return on plan assets when funded.

• there is no accumulated postretirement benefit obligation for other postretirement plans other than pensions

• postretirement benefit plans other than pensions do not create a liability to be shown on the plan sponsor’s balance sheet.

Answer 1

Answers :

:- Option D ( The interest cost component of a defined benefit pension plan is computed as the beginning projected benefit obligation times the discount rate.

:- Option B ( The ABO may be used for balance sheet and income statement presentation under US GAAP is not a proper description of the pension Accumulated Benefit Obligation (ABO)

:- Option B ( postretirement benefit plans other than pensions do not deduct the return on plan assets when funded. )

Thanks...