Deck 22: Employee Benefits

Question 1

Which of the following is not an employee benefit outlined in IAS 19?

A) Short-term employee benefits
B) Long-term employee benefits
C) Post-employment benefits
D) Termination Benefits
E) Share-based Benefits

Answer 1

Share-based Benefits

Question 2

Which of the following would be considered a non-accumulating short-term compensated absence?

A) PTO
B) A Holiday
C) A Sabbatical leave
D) None of the above

Answer 2

A Sabbatical leave

Question 3

Which of the following is recognized in OCI when accounting for post-employment benefits?

A) Service Costs
B) Gains or losses on plan assets
C) Actuarial Gains and losses
D) Two of the above
E) None of the above

Answer 3

Two of the above

Question 4

Which is not an element of calculating defined benefit obligations?

A) Past service costs
B) Defined benefit plan amendments or curtailment
C) Contributions to the defined benefit plan
D) Actuarial changes to the defined benefit plan
E) None of the above

Question 5

Which of the following is NOT an amount recognized in P&L under the defined benefit plan?

A) Current service cost
B) Any past service cost
C) Actuarial fair value remeasurements
D) Net interest on the net defined benefit liability (asset)

Question 6

When an entity benefits from services provided by employees, it records a(n)

A) Asset
B) Liability
C) Expense
D) Gain

Question 7

Which of the following is NOT an example of short-term employee benefits?

A) Stock appreciation rights.
B) Wages, salaries and social security contributions.
C) Profit sharing and bonuses.
D) Non-monetary benefits, such as medical care, housing, cars

Question 8

Actuarial assumptions are

A) aids provided to an entity's management to help in determining salaries, bonuses and profit sharing plans.
B) estimates that significantly affect the cost of employee benefits and the entity's obligation under the plan.
C) defined by legislative process to protect employees in their retirement years.
D) generated from complex programs developed by the Association of Actuarial Estimators.

Question 9

Plan assets comprise

A) funds invested and accumulated earnings.
B) forecasts of future benefits an entity will be obligated to pay to its retired employees.
C) the net assets remaining after current obligations are paid to employees.
D) pension benefit obligations.

Question 10

A deficit or surplus of a defined benefit plan is:

A) the unfunded portion of the present value of the defined benefit obligation.
B) the remaining balance of plan assets after payments to current retirees.
C) the amount of plan assets plus current contributions minus the current year projected benefit obligations.
D) the difference between the present value of the defined benefit obligation minus the fair value of the net assets.

Question 11

Significant judgment can be involved in accounting for employee compensation and benefits.

Question 12

Post-employment benefits are classified as either defined contribution plans or defined benefit plans.

Question 13

Canandaigua, Cayuga & Sons is a hedge fund that gives the same $5,000 bonus to each high-performing employee every winter. CC&S has no legal obligation to give these bonuses. CC&S is not required to record a liability to its employees for these bonuses.

Question 14

John Jingleheimer plans on retiring when he is 55. Right now, the entity he works for, Jacob Schmidt & Sons, will pay him 25 percent of his final estimated salary every year. His estimated final salary is $600,000 and he currently 27. John's pension plan affects Jacob Schmidt & Son's net income before he retires.

Question 15

John Jingleheimer is 55 and has just retired. John's pension plan affects net income after he is retired.

Question 16

Obligations for short-term employee are recognized as an expense as an employee provides services and a liability is recognized for unpaid benefits.

Question 17

Frederikstad & Moss Entity (FME) smelts copper and manufactures corrugated copper sheets to be shipped to other manufacturers. FME owns Pitney Mining Entity (PME), which mines copper ore. FME also recently acquired Sharpsbourg Smelting. All of these companies share a post-retirement defined benefit fund. This cannot be considered a multi-employer plan.

Question 18

Louis works for Robespierre Entity. His pension benefits have not yet vested. They will vest in three years. The present value of Louis's pension benefits are included in Robespierre Entity's pension obligations.

Question 19

Under a defined benefit plan, an entity recognizes the defined benefit obligation, based on actuarial assumptions, net of the fair value of plan assets.

Question 20

Entities may legally provide employees with other long-term benefits (other than post-employment benefits and termination benefits).

Question 21

Provide four examples of compensated absences.

Question 22

Wacker & Adams Entity has a defined benefit plan. As of the end of the year, the fair value of plan assets is ₤245 million with rate of return of 7 percent. Benefit obligations rose 20 percent to a present value of ₤200 million. What is Wacker & Adams Entity's defined benefit liability or asset?

Question 23

Harry has just started a new job at Thermopylae International (TI). TI has a defined benefit plan and uses the projected unit credit method of calculating its obligation. The benefit plan calls for payments equal to 4 percent of final salary every year for five years after retirement at age 65. Harry is age 62. His starting salary is $120,000 per year. Harry's salary will increase 10 percent every year. The discount rate used is 8 percent. Calculate TI's current pension obligation to Harry.

Question 24

Napoleon Enterprises manufactures spears and pikes for the French Empire's war against Prussia and Austria. They tout the best pension benefits in all of the empire. They have a defined contribution plan. Monte works for Napoleon Enterprises and has decided to contribute €160,000 this year to his retirement plan. Monte makes €2 million this year as the president of the Austerlitz division. Napoleon Enterprises has pledged to match employee contributions up to 8 percent of salary. What is the journal entry if Napoleon Enterprises matches Monte's contribution?

Question 25

Belfort Entity's (BE) 20 employees are each entitled to seven paid sick days for each year they work. Unused sick leave may be carried forward for one calendar year and must be used first before using the current year's sick days. At December 31, 20X7, BE's employees have an average of four unused days paid sick leave per employee. BE does not expect a future saving due to unused sick days lapsing. Based on past experience, BE estimates that 10 employees will take no more than seven days of paid sick leave in 20X8 and that the remaining 10 employees will take an average of nine days each. Current wage rate per working day is $600 and the average increase in wages for 20X8 is 10%. What is BE's journal entry to recognize its obligation?

Question 26

On December 10, 20X7, Wiley Entity (WE) contributed $300,000 to its defined contribution plan. $200,000 of that amount is in exchange for employee professional services rendered in 20X7 and $100,000 is in advance for services to be rendered in 20X8. What is WE's journal entry for December 20X7?

Question 27

In 20X7, Helsinki Entity (HE) incurred a defined benefit liability of 50 million Finnish markka. The present value of the defined benefit obligations is 200 million Finnish markka and the fair value of the plan assets is 150 million Finnish markka. HE's contributions to the fund in 20X7 totaled 40 million Finnish markka. What are HE's journal entries to record this information?