17.3Â Â Learning Objective 3 1) Which statement best explains the meaning of “current service cost”? A) The present value of pension benefits that employees have earned. B) The increase in the present value of a defined benefit obligation resulting from employee service in the current period. C) The amount of funds deposited with the pension trust in the year. D) The annual contribution required by the employer as specified in the pension plan agreement. 2) Which best explains a “curtailment’? A) A reduction in the number of employees or the amount of benefits they will receive in the future. B) The employer puts an end to the plan using company lawyers. C) The employer stops contributing to the plan. D) The employees stop contributing to the plan. 3) What is true of the interest cost component of the pension expense? A) ASPE specifies that enterprises should use the yields on high-quality corporate bonds. B) IFRS specifies that enterprises should use the yields on high-quality short-term corporate bonds. C) ) It represents the increase in the pension obligation due to the passage of time. D) IFRS specifies that enterprises should use the yields on medium-quality corporate bonds. 4) A company reported $350,000 of pension expense in its income statement. The balance sheet showed that the pension liability increased by $20,000 over the year. The company was hoping to contribute $30,000. How much cash was paid to the pension trustee during the period? A) $320,000 B) $330,000 C) $350,000 D) $370,000 5) What are actuarial losses or gains in a defined benefit plan? A) Difference arising between the actual and the expected value of plan contributions. B) Expected income earned on the pension plan assets. C) Plan amendments that retrospectively improve pension plan benefits. D) Differences arising between the actual and expected values of the obligation. 6) Discuss why accounting for “defined benefit plans” is so complex and the types of estimates required. 7) In pension accounting, how are past service costs accounted for under ASPE? A) Recognized in the balance sheet as a liability for the full amount. B) Recognized in the income statement as an expense for the full amount. C) Not recognized, but disclosed in a note. D) Included as part of pension expense and may be amortized over a specified period. 8) Summarize the three steps in the accounting for defined benefit pension plans.