Multiple Choice
1. The actuarial present value of all the benefits attributed by the pension benefit formula to employee service rendered before a specified date based on expected future compensation levels is the
a. Projected benefit obligation
b. Prior service cost
c. Service cost
d. Accumulated benefit obligation
Items 2, 3, and 4 are based on the following information: Spath Company adopted a noncontributory defined benefit pension plan on January 1, 2007. Spath Company uses the benefit/years-of-service method, which results in the following information:

The fair value of the plan assets at the end of each year exceeded the accumulated benefit obligation.

2. What is the balance of the accrued pension cost as of December 31?
2007 2008
a. $ 0... $ 60,000
b. $60,000.... $ 60,000
c. $60,000.... $ 66,000
d. $60,000... $126,000

3. What is the pension expense for the year ended December 31, 2008?
a. $390,000
b. $426,000
c. $456,000
d. $480,000

4. As of December 31, 2008, what is the balance in the pension plan asset fund?
a. $456,000
b. $630,000
c. $654,000
d. $840,000

5. Which of the following is not a component of pension expense?
a. Amount funded
b. Service cost
c. Expected return on plan assets
d. Interest cost

6. Davison Company has a noncontributory defined benefit pension plan for its employees. During 2007 the pension plan has a discount rate of 8%, service cost of $98,000, plan assets as of 1/1/07 of $432,000, and an expected return on plan assets of $34,560. On December 31, 2007 the company contributed $90,000 to the pension plan, resulting in a credit to Prepaid/Accrued Pension Cost of $6,300. What is the amount of the projected benefit obligation on January 1, 2007?
a. $332,000
b. $345,600
c. $410,750
d. $432,000

7. On January 1, 2007 the Soloman Company changes the factor in the benefit formula from 0.02 to 0.022, retroactive to the adoption of the plan. The amendment will result in a(an)
a. Decrease in projected benefit obligation
b. Increase in service cost
c. Decrease in pension expense
d. Increase in plan assets


8. The McCollum Company amended its noncontributory defined benefit pension plan at the beginning of 2004. The unrecognized prior service cost related to this amendment amounts to $240,000. Information regarding the four participating employees is as follows:
Employee Expected to Retire After
A .........Year 1
B .........Year 2
C .........Year 4
D .........Year 5
Using the straight-line method, what is the amount of unrecognized prior service cost to be amortized in 2007?
a. $0
b. $40,000
c. $60,000
d. $80,000

9. FASB Statement No. 88 requires that a company record a loss and a liability for termination benefits paid to employees when
a. The employee accepts the offer
b. The amount can be reasonably estimated
c. The employee accepts the offer or the amount can be reasonably estimated
d. The employee accepts the offer and the amount can be reasonably estimated

10. FASB Statement No. 132R requires a company with a defined benefit pension plan to make all of the following disclosures except
a. The amount of the pension expense, showing each of the components separately
b. The estimates of contributions for the next five years
c. The funded status of the plan
d. The discountrate

Service cost Amount funded Discount rate Expected rate of return 2007 $300,000 240,000 1090 10% 2008 $450,000 390,000 10% 10%