DR. FILEMON C.

AGUILAR MEMORIAL COLLEGE OF LAS PINAS CITY

College of Accountancy
QUIZ- FINACC2- POST EMPLOYMENT BENEFIT AND DEFINED BENEFIT PLAN

NAME________________________________ Year/Section_________ February__, 2018

I. MULTIPLE CHOICE-Indicate the correct letter answer on the space before each number. Answers
without the necessary supporting computations will not be considered.

1. Presented below is pension information related to Woods, Inc. for the year 2011:
Service cost $72,000
Interest on defined benefit obligation 54,000
Interest on vested benefits 24,000
Amortization of past service cost due to increase in benefits 12,000
Expected return on plan assets 18,000
The amount of pension expense to be reported for 2011 is
a. $108,000. b. $144,000. c. $162,000. d. $120,000.

2. Kraft, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the
plan for the year 2011.
Service cost $ 200,000
Contributions to the plan 220,000
Actual return on plan assets 180,000
Defined benefit obligation (beginning of year) 2,400,000
Fair value of plan assets (beginning of year) 1,600,000
The expected return on plan assets and the settlement rate were both 10%. The amount of pension
expense reported for 2011 is
a. $200,000. b. $260,000. c. $280,000. d. $440,000.

3. Presented below is information related to Jensen Inc. pension plan for 2011.
Service cost $900,000
Actual return on plan assets 210,000
Interest on defined benefit obligation 390,000
Amortization of net loss 90,000
Amortization of past service cost due to increase in benefits 165,000
Expected return on plan assets 180,000
What amount should be reported for pension expense in 2011?
a. $1,365,000 b. $1,335,000 c. $1,515,000 d. $1,155,000

4. Barton, Inc. received the following information from its pension plan trustee concerning the operation
of the company's defined-benefit pension plan for the year ended December 31, 2011.
January 1, 2011 December 31, 2011
Fair value of pension plan assets $4,200,000 $4,500,000
Defined benefit obligation 4,800,000 5,160,000
Unrecognized Net Gain / Loss -0- (90,000)
The service cost component of pension expense for 2011 is $360,000 and the amortization of past
service cost due to an increase in benefits is $60,000. The discount rate is 10% and the expected rate
of return is 9%. What is the amount of pension expense for 2011?
a. $360,000 b. $522,000 c. $531,000 d. $432,000
Use the following information for questions 5 through 7.

The following information for Cooper Enterprises is given below:

December 31, 2011
Assets and obligations
Plan assets (at fair value) $100,000
Defined benefit obligation 200,000
Other Items
Pension asset / liability, January 1, 2011 5,000
Contributions 60,000
Unrecognized Net loss 83,950
There were no unexpected gains or losses at January 1, 2011. The average remaining service life of
employees is 10 years.

5. What is the pension expense that Cooper Enterprises should report for 2011?
a. $76,050 b. $110,000 c. $60,000 d. $83,950

6. What is the amount that Cooper Enterprises should report as its pension liability on its statement of
financial position as of December 31, 2011?
a. $100,000 b. $15,000 c. $105,000 d. $200,000

7. The amortization of Unrecognized Net Loss for 2012 is:

a. $0 b. $6,395 c. $11,500 d. $8,395

8. The following information is related to the pension plan of Long, Inc. for 2011.
Actual return on plan assets $200,000
Amortization of net gain 82,500
Amortization of past service cost due to increase in benefits 150,000
Expected return on plan assets 230,000
Interest on defined benefit obligation 362,500
Service cost 800,000
Pension expense for 2011 is
a. $1,195,000. b. $1,165,000. c. $1,030,000. d. $1,000,000.

9. Presented below is pension information for Green Company for the year 2011:
Expected return on plan assets $24,000
Interest on vested benefits 15,000
Service cost 30,000
Interest on defined benefit obligation 21,000
Amortization of past service cost due to increase in benefits 18,000
The amount of pension expense to be reported for 2011 is
a. $93,000. b. $69,000. c. $60,000. d. $45,000.

10. Hubbard, Inc. received the following information from its pension plan trustee concerning the operation
of the company's defined-benefit pension plan for the year ended December 31, 2011.
1/1/11 12/31/11
Defined benefit obligation $11,400,000 $11,760,000
Pension assets (at fair value) 6,000,000 6,900,000
Net (gains) and losses -0- 240,000
The service cost component of pension expense for 2011 is $840,000 and the amortization of past
service cost due to an increase in benefits is $180,000. The rate is 10% and the expected rate of
return is 8%. What is the amount of pension expense for 2011?
a. $1,716,000 b. $1,680,000 c. $1,608,000 d. $1,440,000
Use the following information for questions 11 through 13.

The following data are for the pension plan for the employees of Lockett Company.
1/1/10 12/31/10 12/31/11
Defined benefit obligation $8,100,000 $8,400,000 $11,100,000
Plan assets (at fair value) 6,900,000 9,000,000 9,900,000
AOCL – net loss -0- 1,440,000 1,500,000
Discount rate (for year) 10% 9%
Expected rate of return (for year) 8% 7%
Lockett’s contribution was $1,260,000 in 2011 and benefits paid were $1,125,000. Lockett
estimates that the average remaining service life is 15 years.

11. The actual return on plan assets in 2011 was

a. $900,000. b. $765,000. c. $600,000. d. $465,000.

12. Assume that the actual return on plan assets in 2011 was $800,000. The unexpected gain on plan
assets in 2011 was a. $191,000. b. $170,000. c. $149,000. d. $107,000.

13. The corridor for 2011 was $900,000. The amount of unrecognized net loss amortized in 2011 was
a. $100,000. b. $96,000. c. $42,000. d. $36,000.

14. At the end of the current period, Oxford Ltd. has a defined benefit obligation of £195,000 and pension
plan assets with a fair value of £110,000. The amount of the vested benefits for the plan is £105,000.
What amount related to its pension plan will be reported on the company’s statement of financial
position? a. £5,000 b. £90,000 c. £85,000 d. £20,000

15. At the end of the current year, Kennedy Co. has a defined benefit obligation of £335,000 and pension
plan assets with a fair value of £245,000. The amount of the vested benefits for the plan is £225,000.
Kennedy has unrecognized past service costs of £24,000 and an unrecognized actuarial gain of
£8,300. What account and amount(s) related to its pension plan will be reported on the company’s
statement of financial position?
a. pension liability and £74,300 b. pension liability and £90,000
c. pension asset and £233,300 d. pension asset and £110,000

16 At the end of the current year, Churchill Industries has a defined obligation of £433,000 and pension
plan assets with a fair value of £265,000. The amount of the vested benefits for the plan is £225,000.
Churchill has unrecognized past service costs of £46,000 and an unrecognized actuarial gain of
£12,900. What account and amount(s) related to its pension plan will be reported on the company’s
statement of financial position?
a. pension asset and £168,000 b. pension liability and £109,100
c. pension liability and £134,900 d. pension asset and £115,900

17. For 2012, Garvey Chambers plc had pension expense of £61 million and contributed £52 million to the
pension fund. Which of the following is the journal entry that Garvey Chambers would make to record
pension expense and funding?
a. Pension Expense………………………………………….. 61,000,000
Pension Asset/Liability…………………………………. 9,000,000
Cash……………………………………………….... 52,000,000
b. Pension Expense…………………………………………. 61,000,000
Pension Asset/Liability…………………………………. 9,000,000
Cash………………………………………………… 70,000,000
c. Pension Expense…………………………………………. 52,000,000
Pension Asset/Liability………………………………… 9,000,000
Cash………………………………………………… 61,000,000
d. Pension Expense………………………………………… 9,000,000
Pension Asset/Liability………………………………… 52,000,000
Cash………………………………………………… 61,000,000

18. Clarkson Co. provides the following information about its Pension plan for the year 2012.

Service cost 90,000

Past service cost amortization 3,000
Contribution to the plan 16,000
Actual and expected return on plan assets 62,000
Benefits paid 40,000
Plan assets at January 1, 2012 710,000
Defined benefit obligation at January 1, 2012 810,000
Unrecognized past service cost balance at January 1, 2012 100,000
Discount rate 9%
Based on this information, what is the Pension expense for 2012?
a. 165,900 b. 913,900 c. 72,900 d. 103,900

19. Carlton Co. provides the following information about its Pension plan for the year 2012.

Service cost £95,000

Past service cost amortization 4,000
Contribution to the plan 16,000
Actual and expected return on plan assets 65,000
Benefits paid 40,000
Plan assets at January 1, 2012 810,000
Defined benefit obligation at January 1, 2012 910,000
Unrecognized past service cost balance at January 1, 2012 100,000
Discount rate 8%
Based on this information, what is the Pension expense for 2012?
a. £236,800 b. £100,000 c. £72,800 d. £106,800

20. At January 1, 2012, Wembley Company had plan assets of €250,000 and a defined benefit obligation of
the same amount. During 2012, service cost was €27,500, the discount rate was 10%, actual and
expected return on plan assets were €25,000, contributions were €20,000, and benefits paid were
€17,500. Based on this information what would be the defined benefit obligation for Wembley
Company for 2012? a. €277,500 b. €285,000 c. €27,500 d. €302,500

21. At January 1, 2012, Trevor Company had plan assets of €215,000 and a defined benefit obligation of
the same amount. During 2012, service cost was €22,500, the discount rate was 10% actual and
expected return on plan assets were €26,000, contributions were €20,000, and benefits paid were
€19,500. Based on this information what would be the Defined Benefit obligation for Trevor Company
for 2012? a. €263,500 b. €239,500 c. €22,500 d. €259,000

22. At January 1, 2012, Wembley Company had plan assets of €250,000 and a defined benefit obligation
of the same amount. During 2012, service cost was €27,500, the discount rate was 10% actual and
expected return on plan assets were €25,000, contributions were €20,000, and benefits paid were
€17,500. Based on this information, what would be the amount of plan assets on 12/31/12?
a. A debit balance of €277,500 b. A debit balance of €295,000
c. A credit balance of €7,500 d. A credit balance of €285,000
 23. At January 1, 2012, Pimlico Company had plan assets of £215,000 and a defined benefit obligation of
the same amount. During 2012, service cost was £27,500, the discount rate was 10% actual and
expected return on plan assets were £28,000, contributions were £20,000, and benefits paid were
£18,500. Based on this information, what would be the amount of plan assets on 12/31/12?
a. A debit balance of £265,000 b. A debit balance of £5,500
c. A credit balance of £246,500 d. A credit balance of £283,500

Use the following information for questions 24 and 25.

On January 1, 2011, Newlin Co. has the following balances:
Defined benefit obligation $2,100,000
Fair value of plan assets 1,800,000
The settlement rate is 10%. Other data related to the pension plan for 2011 are:
Service cost $180,000
Amortization of past service costs due to increase in benefits 60,000
Contributions 300,000
Benefits paid 105,000
Actual return on plan assets 237,000
Amortization of unrecognized net gain 18,000

24. The balance of the defined benefit obligation at December 31, 2011 is
a. $2,685,000. b. $2,385,000. c. $2,355,000. d. $2,337,000.

25. The fair value of plan assets at December 31, 2011 is

a. $2,430,000. b. $2,250,000. c. $2,232,000. d. $2,214,000.

Use the following information for questions 26 through 30.

The following information relates to the pension plan for the employees of Turner Co.:
1/1/10 12/31/10 12/31/11
Defined benefit obligation $5,580,000 $5,976,000 $8,004,000
Fair value of plan assets 5,100,000 6,240,000 6,888,000
Unrecognized – net (gain) or loss -0- (864,000) (960,000)
Discount rate (for year) 11% 11%
Expected rate of return (for year) 8% 7%
Turner estimates that the average remaining service life is 16 years. Turner's contribution was $756,000 in
2011 and benefits paid were $564,000.

26. The interest cost for 2011 is

a. $537,840. b. $607,200. c. $657,360. d. $880,440.

27. The actual return on plan assets in 2011 is

a. $408,000. b. $456,000. c. $588,000. d. $648,000.

28. The unexpected gain or loss on plan assets in 2011 is

a. $39,360 loss. b. $22,560 gain. c. $19,200 gain. d. $214,560 gain.

29. The corridor for 2011 is

a. $619,200. b. $624,000. c. $678,000. d. $800,400.

30. The amount of unrecognized (net gain) amortized in 2011 is

a. $15,300. b. $15,000. c. $11,626. d. $9,977.
31. Zephyr plc amends its defined pension plan on January 1, 2012, resulting in £420,000 of past service
cost. The company has 400 active employees, of which 100 vest immediately (25%) and the other 300
(75%) vest in four years. The unrecognized past service cost applicable to the vested employees is
£105,000 and vests immediately. The unrecognized past service cost related to the unvested
employees is £315,000 and is amortized over five years. How much would Dawson report as
amortization of past service costs in 2012?
a. £63,000 b. £126,000 c. £105,000 d. £168,000

32. Dawson plc amends its defined pension plan on January 1, 2012, resulting in £520,000 of past service
cost. The company has 600 active employees, of which 120 vest immediately (20%) and the other 480
(80%) vest in three years. The unrecognized past service cost applicable to the vested employees is
£104,000 and vests immediately. The unrecognized past service cost related to the unvested
employees is £416,000 and is amortized over five years. After reporting amortization of past service
costs in 2012, what is the ending amount of unrecognized PSC?
a. £520,000 b. £332,800 c. £416,000 d. £436,800

33. Towson Ltd. has experienced tough competition, leading it to seek concessions from its employees in
the company’s pension plan. In exchange for promises to avoid layoffs and wage cuts, the employees
agreed to receive lower pension benefits in the future. As a result , Towson amended its pension plan
on January 1,2012, and recorded unrecognized past service cost of €225,000. The average period to
vesting for the benefits affected by this plan is 6 years. What is the unrecognized past service cost
amortization for 2012? a. €225,000 b. €112,500 c. €18,750 d. €37,500

34. Brompton Ltd. is evaluating amendments to its pensions plans. Plan 1 covers its salaried employees
and Plan 2 provides benefits to its hourly workers. On January 1, 2012, Brompton will grant employees
in Plan 2 additional pension benefits of €318,000 based on their past service. Employees in this plan
have an average period to vesting of 6 years. Plan 1 will be amended to reduce benefits by €160,000
(in exchange, employees will receive increased contributions to the company’s defined contribution
plan). Employees in this plan have an average period to vesting of 5 years. What is the total
unrecognized past service cost amortization for 2012?
a. €43,455 b. €85,000 c. €36,933 d. €21,000

35. Willshire Ltd. is evaluating amendments to its pensions plans. Plan 1 covers its salaried employees
and Plan 2 provides benefits to its hourly workers. On January 1, 2012, Willshire will grant employees
in Plan 2 additional pension benefits of £240,000 based on their past service. Employees in this plan
have an average period to vesting of 8 years. Plan 1 will be amended to reduce benefits by £120,000
(in exchange, employees will receive increased contributions to the company’s defined contribution
plan). Employees in this plan have an average period to vesting of 6 years. What is the total
unrecognized past service cost amortization for 2012?
a. €50,000 b. €60,000 c. €25,714 d. €10,000

36. Parker Corporation had a defined benefit obligation of €3,200,000 and plan assets of €2,900,000 at
January 1,2012. Parker’s unrecognized net pension loss was €575,000 at that time. The average
remaining service period of Parker’s employees is 5 years. What is Parker’s minimum amortization of
pension loss? a. €51,000 b. €30,000 c. €57,000 d. €55,000

37. Winston Corporation had a defined benefit obligation of €3,500,000 and plan assets of €3,000,000 at
January 1, 2012. Winston’s unrecognized net pension loss was €615,000 at that time. The average
remaining service period of Winston’s employees is 5 years. What is Winston’s minimum amortization
of pension loss?
a. €63,000 b. €35,000 c. €10,000 d. €53,000

38. Yamamoto Company experienced an actuarial loss of ¥750 in its defined benefit plan in 2012.
Yamamoto has elected to recognize these losses immediately. For 2012, Yamamoto’s revenues are
¥125,000, and expenses (excluding pension expense of ¥14,000, which does not include the actuarial
 loss) are ¥85,000. What is the amount of net income that would be presented in Yamamoto’s
statement of comprehensive income for 2012, if the company recognizes the loss in net income?
a. ¥125,000 b. ¥26,000 c. ¥25,250 d. ¥39,250

39. Yamamoto Company experienced an actuarial loss of ¥750 in its defined benefit plan in 2012.
Yamamoto has elected to recognize these losses immediately. For 2012, Yamamoto’s revenues are
¥125,000, and expenses (excluding pension expense of ¥14,000, which does not include the actuarial
loss) are ¥85,000. What is the amount of net income that would be presented in Yamamoto’s
statement of comprehensive income for 2012, if the company recognizes the loss in other
comprehensive income?
a. ¥125,000 b. ¥25,250 c. ¥26,000 d. ¥39,250

40. Presented below is information related to Decker Manufacturing Company as of December 31, 2011:
Defined benefit obligation in excess of plan assets $900,000
Unrecognized OCI -net gain 300,000
Unrecognized OCI (PSC) 405,000
The amount for the past service cost is related to an increase in benefits. The fair value of the pension
plan assets is $600,000.
The pension asset / liability reported on the statement of financial position at December 31, 2011 is
a. Pension liability of $300,000 b. Pension liability of $600,000
c. Pension liability of $900,000 d. Pension liability of $1,305,000

Use the following information for questions 41 and 42.

Foster Corporation received the following report from its actuary at the end of the year:
December 31, 2010 December 31, 2011
Defined benefit obligation $1,600,000 $1,800,000
Fair value of pension plan assets 1,380,000 1,440,000

41. The amount reported as the pension liability at December 31, 2010 is
a. $ -0-. b. $200,000. c. $220,000. d. $360,000.

42. The amount reported as the pension liability at December 31, 2011 is
a. $1,800,000 b. $1,600,000 c. $380,000 d. $360,000

Use the following information for questions 43 and 44.

The following information relates to Jackson, Inc.:

For the Year Ended December 31,
2010 2011
Plan assets (at fair value) $1,260,000 $1,824,000
Pension expense 570,000 450,000
Defined benefit obligation 1,620,000 1,884,000
Annual contribution to plan 600,000 450,000
Unrecognized PSC 480,000 420,000

43. The amount reported as the liability fo

a. $ -0-. b. $30,000. c. $360,000. d. $390,000.

44. The amount reported as the liability for pensions on the December 31, 2011 statement of financial
position is a. $ -0-. b. $60,000. c. $1,884,000. d. $520,000.
 45. Presented below is information related to Noble Inc. as of December 31, 2011.
Net Gain/Loss $ 90,000
Defined benefit obligation 3,600,000
Vested benefits 1,620,000
Plan assets (at fair value) 3,384,000
Unrecognized PSC -0-

The amount reported as the pension liability on Noble's statement of financial position at December
31, 2011 is as follows: a. $ -0-. b. $90,000. c. $126,000. d. $216,000.

46. Presented below is pension information related to Waters Company as of December 31, 2011:
Defined benefit obligation $3,500,000
Plan assets (at fair value) 3,600,000
Unrecognized Net gain/loss 100,000
The amount to be reported as Pension Asset / Liability as of December 31, 2011 is
a. Pension Liability of $200,000. b. Pension Asset of $200,000. c. Pension Liability of $100,000.

Use the following information for questions 47 and 48.

On January 1, 2011, Parks Co. has the following balances:

Defined benefit obligation $4,200,000
Fair value of plan assets 3,750,000

The discount rate is 10%. Other data related to the pension plan for 2011 are:
Service cost $240,000
Amortization of past service costs 54,000
Contributions 270,000
Benefits paid 225,000
Actual return on plan assets 264,000
Amortization of unrecognized net gain 18,000

47. The balance of the defined benefit obligation at December 31, 2011 is
a. $4,572,000. b. $4,590,000. c. $4,629,000. d. $4,635,000.

48. The fair value of plan assets at December 31, 2011 is

a. $3,531,000. b. $3,789,000. c. $4,059,000. d. $4,284,000.

49. Huggins Company has the following information at December 31, 2011 related to its pension plan:
Defined benefit obligation $4,000,000
Plan assets (fair value) 4,200,000
Unrecognized PSC 300,000

The amount of pension asset / liability Huggins Company would recognize at December 31, 2011 is
a. Pension liability of $300,000. b. Pension asset of $1,000,000.
c. Pension liability of $200,000. d. Pension asset of $200,000.

50. The following pension plan information is for Farr Company at December 31, 2011.
Defined benefit obligation $8,400,000
Plan assets (at fair value) 6,150,000
Unrecognized PSC 540,000
Pension expense for 2011 3,000,000
Contribution for 2011 2,400,000
The amount to be reported as the liability for pensions on the December 31, 2011 balance sheet is
 a. $2,250,000. b. $1,950,000. c. $1,710,000. d. $1,050,000.

51. At December 31, 2012, Trafalgar Corporation had a defined benefit obligation of €510,000 plan assets
of €322,000, and unrecognized past service cost of €127,000. Based on this information, What is the
funded status of Trafalgar’s pension?
a. €322,000 b. €61,000 c. €188,000 d. €315,000

52. At December 31, 2012, Crosson Corporation had a defined benefit obligation of €620,000 plan assets
of €347,000, and unrecognized past service cost of €122,000. Based on this information, what is the
funded status of Crosson’s pension?
a. €347,000 b. €395,000 c. €273,000 d. €151,000

53. As a result of a discontinued operation, Wimbledon Ltd. is curtailing some benefits provided in its
pension plan. It has the following data related to the plan.
Defined benefit obligation (Credit) €(1,500)
Fair value of plan assets (Debit) 1,350
Funded status (150)
Unrecognized actuarial gains (Credit) (30)
Unrecognized past service costs (PSC) (Debit) 80
Pension asset/liability € (100)
The curtailment results in a €180 reduction in the defined benefit obligation (there is no impact on the
plan assets). The employees affected comprise 20% of all employees in the plan. What journal entry
would be recorded for the curtailment by Wimbledon?
a. Pension Asset/Liability 170
Gain on curtailment 170
b. Pension Asset/Liability 180
Gain on curtailment 180
c. Pension Asset/Liability 30
Gain on curtailment 30
d. Pension Asset/Liability 210
Gain on curtailment 210

54. Guzman Company discontinues an operating segment, and employees of the discontinued segment will
earn no further benefits. Using current actuarial assumptions (including current market interest rates
and other current market prices) immediately before the curtailment, Guzman has a defined benefit
obligation (000 omitted) with a net present value of €1,000, plan assets with a fair value of €820, net
cumulative unrecognized actuarial gains of €50, and €80 unrecognized past service costs (all
unvested). The curtailment reduces the net present value of the obligation by €100 to €900. Of the
previously unrecognized actuarial gains and past service costs amounts, 10 present relates to the part
of the obligation that was eliminated through the curtailment. What was the effect of the curtailment?
a. €800 gain b. €180 loss c. €100 loss d. €95 gain

55. The following information pertains to Hopson Co.'s pension plan:

Actuarial estimate of defined benefit obligation at 1/1/11 $72,000
Assumed discount rate 10%
Service costs for 2011 $18,000
Pension benefits paid during 2011 $15,000
If no change in actuarial estimates occurred during 2011, Hopson's defined benefit obligation at
December 31, 2011 was
a. $64,200. b. $75,000. c. $79,200. d. $82,200.

56. Interest cost included in pension expense recognized for a period by an employer sponsoring a
defined-benefit pension plan represents the
a. shortage between the expected and actual returns on plan assets.
 b. increase in the defined benefit obligation due to the passage of time.
c. increase in the fair value of plan assets due to the passage of time.
d. amortization of the discount on unrecognized PSC.

57. Logan Corp., a company whose stock is publicly traded, provides a noncontributory defined-benefit
pension plan for its employees. The company's actuary has provided the following information for the
year ended December 31, 2011:
Defined benefit obligation $600,000
Fair value of plan assets 825,000
Service cost 240,000
Interest on defined benefit obligation 24,000
Amortization of past service cost 60,000
Expected and actual return on plan assets 82,500
No contributions have been made for 2011 pension cost. In its December 31, 2011 statement of
financial position, Logan should report a pension asset / liability of
a. Pension liability of $600,000 b. Pension asset of $824,000
c. Pension asset of $225,000 d. Pension liability of $525,000

58. Seigel Co. maintains a defined-benefit pension plan for its employees. At each statement of financial
position date, Yeager should report a pension asset / liability equal to the
a. accumulated benefit obligation. b. defined benefit obligation.
c. vested benefit obligation. d. funded status relative to the defined benefit obligation.

59. Ohlman, Inc. maintains a defined-benefit pension plan for its employees. As of December 31, 2011,
the fair value of the plan assets is less than the vested benefit obligation. The defined benefit
obligation exceeds the vested benefit obligation. In its balance sheet as of December 31, 2011,
Ohlman should report a liability in the amount of the
a. excess of the defined benefit obligation over the fair value of the plan assets.
b. excess of the vested benefit obligation over the fair value of the plan assets.
c. defined benefit obligation.
d. vested benefit obligation.

60. At December 31, 2011, the following information was provided by the Vargas Corp. pension plan
administrator:
Fair value of plan assets $4,500,000
Defined benefit obligation 7,200,000
What is the amount of the pension liability that should be shown on Vargas' December 31, 2011
statement of financial position?
a. $7,200,000 b. $2,700,000 c. $1,620,000 d. $1,080,000

II. STRAIGHT PROBLEMS

PROBLEM 1

Ex. 20-118—Measuring and recording pension expense.

Kessler, Inc. received the following information from its pension plan trustee concerning the operation of the
company's defined-benefit pension plan for the year ended December 31, 2011:
January 1, 2011 December 31, 2011
Defined benefit obligation $2,500,000 $2,850,000
Fair value of plan assets 1,250,000 1,600,000
Unrecognized PSC 540,000 300,000
The service cost component for 2011 is $150,000 and the amortization of past service cost is $240,000. The
company's actual funding of the plan in 2011 amounted to $510,000. The expected return on plan assets and
the discount rate were both 8%.

Instructions
(a) Determine the pension expense to be reported in 2011.
(b) Prepare the journal entry to record pension expense and the employers' contribution to the pension plan
in 2011.

PROBLEM 2

Ex. 20-120— Recording pension asset / liability.

Miles Co. had the following selected balances at December 31, 2011:
Defined benefit obligation $4,700,000
Fair value of plan assets 4,340,000
Unrecognized PSC 170,000

Instructions
Calculate the pension asset / liability to be recorded at December 31, 2011.

PROBLEM 3

Ex. 20-121—Pension calculations.

Montoya Company has available the following information about its defined-benefit pension plan for the year
ending December 31, 2011:
Service cost for 2011 $ 25,000
Plan assets at fair value 630,000
Unrecognized PSC 300,000
Vested benefit obligation 505,000
Fair value of plan assets 725,000
Defined benefit obligation 865,000
Unrecognized net gain 90,000
Interest on defined benefit obligation 64,000

Instructions
(a) Calculate the pension asset / liability to be recorded at December 31, 2011.
(b) Calculate the 2012 amortization of the net gain. The average remaining service life of employees is 10
years.