INTERMEDIATE ACCOUNTING III (5-9)
PART 2 EXAM QUESTIONS &
UPDATED CORRECT ANSWERS
Requires an employer to contribute a certain sum each period based on the formula -
Correct Answer ✔✔ 25. In a defined-contribution plan, a formula is used that
a. Defines the benefits that the employee will receive at the time of retirement
b. Ensures that pension expense and the cash funding amount will be different
c. Requires an employer to contribute a certain sum each period based on the formula
d. Ensures that employers are at risk to make sure funds are available at retirement
The benefits to be received by employees are determined by an employee's highest
compensation level defined by the terms of the plan - Correct Answer ✔✔ 26. Which of
the following is not a characteristic of a defined-contribution pension plan?
a. The employer's contribution each period is based on a formula
b. The benefits to be received by employees are determined by an employee's highest
compensation level defined by the terms of the plan
c. The accounting for a defined-contribution plan is straightforward and uncomplicated
d. The benefit of gain or the risk of loss from the assets contributed to the pension fund
is borne by the employee
Defines the benefits that the employee will receive at the time of retirement. - Correct
Answer ✔✔ 27. In a defined-benefit plan, a formula is used that
a. Requires that the benefit of gain or the risk of loss from the assets contributed to the
pension plan be borne by the employee.
b. Defines the benefits that the employee will receive at the time of retirement.
c. Requires that pension expense and the cash funding amount be the same.
d. Defines the contribution the employer is to make; no promise is made concerning the
ultimate benefits to be paid out to the employees.
An appropriate funding pattern must be established to ensure that enough monies will
be available at retirement to meet the benefits promised - Correct Answer ✔✔ In
accounting for a defined-benefit pension plan,
a. An appropriate funding pattern must be established to ensure that enough monies will
be available at retirement to meet the benefits promised
b. The employer's responsibility is simply to make a contribution each year based on the
formula established in the plan
c. The expense recognized each period is equal to the cash contribution
d. the liability is determined based upon known variables that reflect future salary levels
promised to employees
,Contribute toward future obligations - Correct Answer ✔✔ What should companies do to
fund a defined benefit plan?
a. Calculate the benefit obligation
b. Contribute toward future obligations
c. Recognize pension expense
d. Adjust fair value of plan assets
A defined benefit plan - Correct Answer ✔✔ Which type of pension plan guarantees the
benefits that employees will receive?
a. A defined contribution plan
b. A defined benefit plan
c. A contributory plan
d. A noncontributory plan
Employer - Correct Answer ✔✔ In substance, who do the trust assets and liabilities
belong to under a defined benefit plan?
a. The trust
b. Employee
c. The government
d. Employer
Defined benefit plan - Correct Answer ✔✔ Which plan outlines the payments that
employees will receive when they retire?
a. Contributory plan
b. Defined contribution plan
c. Defined benefit plan
d. Noncontributory plan
Employee's compensation level - Correct Answer ✔✔ Which factor is a function of the
defined benefit plan funding model for each employee's benefit?
a. Employer's total assets for the current year
b. Employee's compensation level
c. Employee's age at the time of hire
d. Employer's net income for the current year
Defined benefit plan - Correct Answer ✔✔ A company provides a pension plan to
eligible new hires. Pension payments are typically based on the employee's years of
service and the compensation level as the employee approaches retirement. It is the
responsibility of the employer to pay any shortfall in the accumulated assets held by the
trust.
Which type of plan is described in the scenario?
a. Roth individual retirement account
b. Defined benefit plan
c. Defined contribution plan
d. Individual retirement account
, The company is at risk for payments falling short of the future benefits. - Correct Answer
✔✔ A company provides employees with a noncontributory defined benefit plan as part
of the overall compensation package.
Which characteristic is associated with this type of plan?
a. An asset is reported on the company's books if the contribution is less than the
required amount.
b. The employee bears part of the cost of the plan.
c. The company is at risk for payments falling short of the future benefits.
d. The benefits paid out are not guaranteed.
Length of service - Correct Answer ✔✔ Which factor is considered when calculating an
employee's pension payment in a defined benefit plan?
a. Length of service
b. Employer profits
c. Employee contributions
d. Age at hiring
Employee's compensation level - Correct Answer ✔✔ Which factor is a function of the
defined benefit plan funding model for each employee's benefit?
a. Employer's net income for the current year
b. Employer's total assets for the current year
c. Employee's age at the time of hire
d. Employee's compensation level
Defined benefit plan - Correct Answer ✔✔ A company provides a pension plan to
eligible new hires and bears all the costs and risks.
Which type of plan is described in the scenario?
a. Defined benefit plan
b. Defined contribution plan
c. Vested benefit obligation account
d. Roth individual retirement account
A defined benefit plan - Correct Answer ✔✔ Which type of pension plan guarantees the
benefits that employees will receive?
a. A defined contribution plan
b. A defined benefit plan
c. A contributory plan
d. A noncontributory plan
An employer - Correct Answer ✔✔ Commonly, in a defined benefit plan, who makes the
contributions to the plan?
a. The government
b. An independent third party
c. An employee
PART 2 EXAM QUESTIONS &
UPDATED CORRECT ANSWERS
Requires an employer to contribute a certain sum each period based on the formula -
Correct Answer ✔✔ 25. In a defined-contribution plan, a formula is used that
a. Defines the benefits that the employee will receive at the time of retirement
b. Ensures that pension expense and the cash funding amount will be different
c. Requires an employer to contribute a certain sum each period based on the formula
d. Ensures that employers are at risk to make sure funds are available at retirement
The benefits to be received by employees are determined by an employee's highest
compensation level defined by the terms of the plan - Correct Answer ✔✔ 26. Which of
the following is not a characteristic of a defined-contribution pension plan?
a. The employer's contribution each period is based on a formula
b. The benefits to be received by employees are determined by an employee's highest
compensation level defined by the terms of the plan
c. The accounting for a defined-contribution plan is straightforward and uncomplicated
d. The benefit of gain or the risk of loss from the assets contributed to the pension fund
is borne by the employee
Defines the benefits that the employee will receive at the time of retirement. - Correct
Answer ✔✔ 27. In a defined-benefit plan, a formula is used that
a. Requires that the benefit of gain or the risk of loss from the assets contributed to the
pension plan be borne by the employee.
b. Defines the benefits that the employee will receive at the time of retirement.
c. Requires that pension expense and the cash funding amount be the same.
d. Defines the contribution the employer is to make; no promise is made concerning the
ultimate benefits to be paid out to the employees.
An appropriate funding pattern must be established to ensure that enough monies will
be available at retirement to meet the benefits promised - Correct Answer ✔✔ In
accounting for a defined-benefit pension plan,
a. An appropriate funding pattern must be established to ensure that enough monies will
be available at retirement to meet the benefits promised
b. The employer's responsibility is simply to make a contribution each year based on the
formula established in the plan
c. The expense recognized each period is equal to the cash contribution
d. the liability is determined based upon known variables that reflect future salary levels
promised to employees
,Contribute toward future obligations - Correct Answer ✔✔ What should companies do to
fund a defined benefit plan?
a. Calculate the benefit obligation
b. Contribute toward future obligations
c. Recognize pension expense
d. Adjust fair value of plan assets
A defined benefit plan - Correct Answer ✔✔ Which type of pension plan guarantees the
benefits that employees will receive?
a. A defined contribution plan
b. A defined benefit plan
c. A contributory plan
d. A noncontributory plan
Employer - Correct Answer ✔✔ In substance, who do the trust assets and liabilities
belong to under a defined benefit plan?
a. The trust
b. Employee
c. The government
d. Employer
Defined benefit plan - Correct Answer ✔✔ Which plan outlines the payments that
employees will receive when they retire?
a. Contributory plan
b. Defined contribution plan
c. Defined benefit plan
d. Noncontributory plan
Employee's compensation level - Correct Answer ✔✔ Which factor is a function of the
defined benefit plan funding model for each employee's benefit?
a. Employer's total assets for the current year
b. Employee's compensation level
c. Employee's age at the time of hire
d. Employer's net income for the current year
Defined benefit plan - Correct Answer ✔✔ A company provides a pension plan to
eligible new hires. Pension payments are typically based on the employee's years of
service and the compensation level as the employee approaches retirement. It is the
responsibility of the employer to pay any shortfall in the accumulated assets held by the
trust.
Which type of plan is described in the scenario?
a. Roth individual retirement account
b. Defined benefit plan
c. Defined contribution plan
d. Individual retirement account
, The company is at risk for payments falling short of the future benefits. - Correct Answer
✔✔ A company provides employees with a noncontributory defined benefit plan as part
of the overall compensation package.
Which characteristic is associated with this type of plan?
a. An asset is reported on the company's books if the contribution is less than the
required amount.
b. The employee bears part of the cost of the plan.
c. The company is at risk for payments falling short of the future benefits.
d. The benefits paid out are not guaranteed.
Length of service - Correct Answer ✔✔ Which factor is considered when calculating an
employee's pension payment in a defined benefit plan?
a. Length of service
b. Employer profits
c. Employee contributions
d. Age at hiring
Employee's compensation level - Correct Answer ✔✔ Which factor is a function of the
defined benefit plan funding model for each employee's benefit?
a. Employer's net income for the current year
b. Employer's total assets for the current year
c. Employee's age at the time of hire
d. Employee's compensation level
Defined benefit plan - Correct Answer ✔✔ A company provides a pension plan to
eligible new hires and bears all the costs and risks.
Which type of plan is described in the scenario?
a. Defined benefit plan
b. Defined contribution plan
c. Vested benefit obligation account
d. Roth individual retirement account
A defined benefit plan - Correct Answer ✔✔ Which type of pension plan guarantees the
benefits that employees will receive?
a. A defined contribution plan
b. A defined benefit plan
c. A contributory plan
d. A noncontributory plan
An employer - Correct Answer ✔✔ Commonly, in a defined benefit plan, who makes the
contributions to the plan?
a. The government
b. An independent third party
c. An employee
