The fair value of pension plan assets is used to determine the corridor and to calculate the expected return on plan assets.

The fair value of pension plan assets is used to determine the corridor and to calculate the expected return on plan assets.

Expected Return
Corridor on Plan Assets


a. Yes Yes
b. Yes No
c. No Yes
d. No No


Answer: Yes Yes

Which of the following is true of pension termination?

a. Companies can terminate a pension plan whenever they wish to do so.
b. Terminating a pension plan is illegal in U.S.
c. A company must start a new defined benefit plan after it eliminates the old one.
d. FASB requires recognition in earnings of a gain or loss when a pension obligation is settled.


Answer: FASB requires recognition in earnings of a gain or loss when a pension obligation is settled

A pension fund gain or loss that is caused by a plant closing should be

a. recognized immediately as a gain or loss on the plant closing.
b. spread over the current year and future years.
c. charged or credited to the current pension expense.
d. recognized as a prior period adjustment.


Answer: recognized immediately as a gain or loss on the plant closing

Compensation expense resulting from a compensatory stock option plan is generally

Compensation expense resulting from a compensatory stock option plan is generally

a. recognized in the period of exercise.
b. recognized in the period of the grant.
c. allocated to the periods benefited by the employee's required service.
d. allocated over the periods of the employee's service life to retirement.


Answer: allocated to the periods benefited by the employee's required service

The date on which total compensation expense is computed in a stock option plan is the date

a. of grant.
b. of exercise.
c. that the market price coincides with the option price.
c. that the market price exceeds the option price.


Answer: of grant

A company estimates the fair value of SARs, using an option-pricing model, for

a. share-based equity awards.
b. share-based liability awards.
c. both equity awards and liability awards.
d. neither equity awards or liability awards.


Answer: share-based liability awards