1. Using the fair value method, total compensation expense is computed based on the fair value of the options expected to vest on the date the options are granted to the employees.

A. True

B. False

2. The following info is available related to a company's pension plan for a particular reporting period: Actual return on plan assets $8,000; Service cost $10,000; Interest on projected benefit obligation $7,000; Amortization of prior service cost due to increase in benefits $6,000. The amount of pension expense to be reported for the period is

a. $15,000

b. $20,000

c. $23,000

d. $31,000

3. The employer is required to disclose in notes to the financial statements expected benefit payments to be paid to current plan participants for each of the next five years and in the aggregate for the five fiscal years thereafter.

A. True

B. False

4. When a defined benefit pension plan is amended, the expense and related liability for the prior service costs should be fully reported in the year in which the amendment was adopted.

A. True

B. False

5. Which of the following is a permanent difference that is recognized for tax purposes but not for financial reporting purposes?

a. The deduction for dividends received from U.S. corporations

b. Interest received on state and municipal bonds

c. Premiums paid for hazard insurance on company property

d. A litigation accrual

6. Which of the following is not an advantage of restricted stock plans?

a. Restricted stock better aligns the employee incentives with the companies incentives.

b. Restricted stock can be sold before vesting occurs.

c. Restricted stock never becomes completely worthless.

d. Restricted stock generally results in less dilution to existing stockholders.