- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 11. Employee Compensation: Post-Employment and Share-Based
- Subject 2. Accounting for Defined Benefit Plans
CFA Practice Question
Information regarding the defined-benefit pension plan of Melrose Products included the following for 2011 ($ in millions):
Plan assets, Dec. 31: 525.
Retiree benefits paid (end of year): 85.
Return on plan assets: 50.
B. $210 million.
C. $225 million.
Plan assets, Jan. 1: 350.
Plan assets, Dec. 31: 525.
Retiree benefits paid (end of year): 85.
Return on plan assets: 50.
What were the employer contributions to the pension plan at the end of 2011?
A. $175 million.
B. $210 million.
C. $225 million.
Correct Answer: B
Beginning balance ($350) + actual return ($50) + contributions (?) - retiree benefits paid ($85) = ending balance ($525) [in millions].
User Contributed Comments 3
| User | Comment |
|---|---|
| cfajunkie | I thought actual returns were subtracted? |
| Dalila | Actual return is the return from the plan asset. Actual returns is subtracted from pension expense. In this question they are referring to plan assets, therefore the you need to ADD it because the return increases the value of the plan assets |
| sogah | Thanks Dalila |