CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Information regarding the defined-benefit pension plan of Pauline Products included the following for 2011 ($ in millions):

January 1:
Accrued pension cost: 2.
December 31:
Projected benefit obligation (PBO): 85.
Accumulated benefit obligation (ABO): 75.
Plan assets: 50.
Pension expense: 8.

No contributions were made to the pension plan assets during 2011. At December 31, 2011, what amount should Hall record as additional pension liability?
Correct Answer: 15 million

The minimum liability is $25 ($75 - 50), and the accrued pension cost is $10 ($2 + $8) [in millions].

User Contributed Comments 3

User Comment
danlan2 end of year pension cost=begin of year pension cost+pension expense
HenryQ Good question. Should always consider prepaid/accrued items.
quanttrader additional pension liability = minimum liability (ABO-assets) -accrued liability
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