Whenever a defined-benefit plan is amended and credit is given to employees for years of service provided before the date of amendment
a. both the accumulated benefit obligation and the projected benefit obligation are usually greater than before.
b. both the accumulated benefit obligation and the projected benefit obligation are usually less than before.
c. the expense and the liability should be recognized at the time of the plan change.
d. the expense should be recognized immediately, but the liability may be deferred until a reasonable basis for its determination has been identified.
Answer: both the accumulated benefit obligation and the projected benefit obligation are usually less than before
Gains and losses that relate to the computation of pension expense should be
a. recorded currently as an adjustment to pension expense in the period incurred.
b. recorded currently and in the future by applying the corridor method which provides the amount to be amortized.
c. amortized over a 15-year period.
d. recorded only if a loss is determined.
Answer: recorded currently and in the future by applying the corridor method which provides the amount to be amortized
A corporation has a defined-benefit plan. A pension liability will result at the end of the year if the
a. projected benefit obligation exceeds the fair value of the plan assets.
b. fair value of the plan assets exceeds the projected benefit obligation.
c. amount of employer contributions exceeds the pension expense.
d. amount of pension expense exceeds the amount of employer contributions.
Answer: projected benefit obligation exceeds the fair value of the plan assets
