Question

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

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.

Homework Answers

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. )

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