Question 1 Which of the following describes defined benefit pension plans? Answe

Question

Question 1

Which of the following describes defined benefit pension plans?
Answer:
a The investment risk is borne by the employee.
b The plans are simple and easy to construct.
c The investment risk is borne by the employer.
d Retirement benefits depend on the individual's account balance.
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Question 2

The portion of the obligation that plan participants are entitled to receive regardless of their continued employment is called the:
Answer
a Vested benefit obligation.
b Retiree benefit obligation.
c Actual benefit obligation.
d True benefit obligation.
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Question 3

The PBO is increased by:

Answer
A. An increase in the average life expectancy of employees.

B. Amortization of prior service cost.

C. An increase in the actuary's assumed discount rate.

D. A return on plan assets that is lower than expected.
.
Question 4

Interest cost will:
Answer
a Increase the PBO and increase pension expense.
b Increase pension expense and reduce plan assets.
c Increase the PBO and reduce plan assets.
d Increase pension expense and reduce the return on plan assets.
.
Question 5

A company's defined benefit pension plan had a PBO of $265,000 on January 1, 2009. During 2009, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2009 was $80,000. Plan assets (fair value) increased during the year by $45,000. The amount of the PBO at December 31, 2009, was:
Answer
a $225,000.
b $305,000.
c $331,500.
d None of these is correct.
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Question 6

Louie Company has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $10,000; interest cost, $8,000. The discount rate applied by the actuary was 8%. What was the service cost for the year?
Answer
a $ 2,000.
b $12,000.
c $18,000.
d $92,000.
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Question 7

An underfunded pension plan means that the:
Answer
a PBO is less than plan assets.
b PBO exceeds plan assets.
c ABO is less than plan assets.
d ABO exceeds plan assets.
.
Question 8

The pension expense includes periodic changes that occur:
Answer
a In the PBO.
b In the PBO and the plan assets.
c In the plan assets.
d In the PBO and the ABO.
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Question 9

Assume that at the beginning of the current year, a company has a net gain

Explanation / Answer

a c f e a c b c a e f c a c

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