Problem 1: Danica Company provided the following information related to a defined benefit plan for the year ended
December 31, 2021:
Current service cost P 30,000
Benefits paid 31,000
Contribution to the fund 21,000
Past service cost for the current year 115,000
January 1 December 31
Fair value of Plan Assets 2,100,000 2,400,000
Projected Benefit Obligation 2,200,000 2,500,000
Discount Rate 5% 6%
Expected Rate of return 7% 8%
1) How much would be the employee benefit expense reported in income statement for the current year?
2) What is the remeasurement gain or loss on related to PBO?
3) What is the remeasurement gain or loss on related to FVPA?
4) The journal entry to record the benefit expense for the current year would show what amount of Prepaid/Accrued Benefit Cost? (Indicate
Dr for Debit and Cr for Credit)
Problem 2: Mule Company provided the following information in relation to a defined benefit plan for the current year:
January 1 December 31
Fair value of plan asset 2,600,000 3,000,000
Projected Benefit Obligation 2,000,000 2,100,000
Asset Ceiling 200,000 300,000
Current Service cost 100,000
Contribution to the plan 350,000
Benefits Paid 150,000
Discount Rate 10%
5) What amount should be reported as employee benefit expense?
6) What is the remeasurement gain/loss for the year related to PBO?
7) What is the net remeasurement gain or loss for the current year?
Problem 3: Following are the information related to defined benefit plan of Ester Company:
The employee will receive a retirement benefit of 20% of final salary per annum for a contractual period of three years.
The anticipated salary of the specific employee is P1,000,000 for 2021, and it is expected to increase annually by 15%.’
The discount rate is 10%.
8) What is the estimated pension liability on December 31, 2022 under projected unit credit method? (No rounding off of PV and FV factors)
Problem 4: Following are the information related to defined benefit plan of Estero Company:
The employee will receive an annual retirement benefit of 3% of final salary multiplied by the number of years the employee stayed
with the entity. The employee will receive the first annual pension one year after retirement.
The employee as of December 31, 2021 had worked for 15 years and its current salary is P500,000
The employee is expected to retire in 5 years and at retirement it is estimated that the employee will live for another 6 years.
The salary of the employee is expected to increase at an average of 4% per year. The discount rate is 10%.
9) What is the projected benefit obligation on December 31, 2021?
Problem 5: RRR has 11 employees who are entitled to 30 days annual leave per year of service. The data for the year ended December 31,
2021 are as follows:
The employee’s average daily salary is P585.
An average of 20 days was used by the employees, all earned in 2021.
The annual leave is accumulating and the employees are allowed to accumulate his leave for one year only, after which it will be
forfeited.
It is expected that the employees will take further 6 days leave from their 2021 leave entitlement in 2022.
10) If the employee availed of 8 days of his 2021 leave entitlement in 2022 and the average salary per day during that year is P610, the
journal entry to record the availment would show a debit to salaries expense of _____.