7) A corporation has a defined-benefit plan. A pension liability will result at

Question

7) A corporation has a defined-benefit plan. A pension liability will result at the end of the year if the

a) amount of employer contributions exceeds the pension expense.

b) fair value of the plan assets exceeds the projected benefit obligation.

c) amount of pension expense exceeds the amount of employer contributions.

d) projected benefit obligation exceeds the fair value of the plan assets.

8) According to the FASB, recognition of a liability is required when the projected benefit obligation exceeds the fair value of plan assets. Conversely, when the fair value of plan assets exceeds the projected benefit obligation, the Board

a) requires recognition of an asset.

b) recommends recognition of an asset but does not require such recognition.

c) requires recognition of an asset if the excess fair value of plan assets exceeds the corridor amount.

d) does not permit recognition of an asset.

a) amount of employer contributions exceeds the pension expense.

Explanation / Answer

(7) Answer: d) projected benefit obligation exceeds the fair value of the plan assets. (8) Answer: d) does not permit recognition of an asset.

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