Question

Big Onion Co. uses a defined benefit pension plan. At year-end the pension obligation is $57.8 million and plan assets $46.9 million. This plan is:

	a.	Committed to expend an additional $104.7 million
	b.	Overfunded by $10.9 million
	c.	Underfunded by $10.9 million
	d.	Bankrupt

2 points   

QUESTION 9

Other postemployment benefits include:

	a.	Direct pension payments
	b.	Taxes payable
	c.	Benefits to former employees beyond pensions, such as health insurance
	d.	Bonuses and stock options

1 points   

QUESTION 10

Generally, the long-term impact of issuing stock options to employees is:

	a.	Compensation expense recorded when exercised for the full exercise price
	b.	The cost of stock options is recorded directly to retained earnings
	c.	Dilution of equity, since compensation expense is usually not recorded
	d.	Stock options are almost never exercised by employees

Answer 1

Big onion co:

Assets = 46.9 million

Liabilities = 57.8 million

Obligations are greater than Assets by 10.9 Million

So, THis plan is underfunded by 10.9 Million

Question 9:

Other post-employment benefits (OPEB) are the benefits that an employee will begin to receive at the start of retirement. This does not include pension benefits paid to the retired employee

Eg:Health Insurance, Disability Insurance

So Option C is the right answer

Question 10:

When the stock options are exercised by the employee, Total number of shares will increase and it will result in the dilution of Equity since compensation expense is usually not recorded