Intermediate Accounting

1. What are the differences and similarities between a defined contribution plan and a defined benefit plan? As an employee, would you rather have a defined contribution plan or a defined benefit plan? Explain why. As an employer, would you rather offer a defined contribution plan or a defined benefit plan? Explain why.

2. What are the components of pension expense? How is the interest rate determined? Why is prior service costs amortized? How do the components of pension expense differ among the various types of contribution and benefit plans?

3. How does a pension plan differ from a 401(k) plan? As an employee, would you rather have a pension plan or a 401(k) plan? Explain why. If you were an employer, would your decision change? Explain why or why not.

4. Determine the meaning of the following terms:

(a) Contributory plan.
(b) Vested benefits.
(c) Retroactive benefits.
(d) Years-of-service method.