Part II Problems: Write your final answers on each space provided.

Any form of erasures

will render your answers invalid. Answers with no solutions or wrong solutions will not be
considered.

1. A profit sharing bonus plan requires an entity to pay 10% of its income for the year to
employees who serve throughout the current year and who will continue to serve
throughout the following year. The entity reported income of P90, 000, 000 for 2013.
The entity expects to save 10% of the maximum possible bonus payment through
staff turnover. The bonus will be paid on December 31, 2014. How much is the
amount paid to the employees in 2014 assuming the estimating savings is correct?
__________________

2. On January 1, 2015, an entity announced its decision to close its factory located in
Maguindanao and terminate all 200 employees as a result of economic downturn. The
entity shall pay P20, 000 per employee upon termination. However, to ensure that
the windup of the factory occurs smoothly and all remaining customer orders are
completed, the entity needs to retain at least 20% of employees until closure of the
factory in eight months. As a result, the entity announced that all employees who
agree to stay until the closing of the factory shall receive P60, 000 payment at the
end of eight months in addition to receiving their current wage throughout the period
of closure instead of the P20, 000. Based on the offer, the entity expects to retain 50
employees until the factory is closed. Out of the total benefits under termination
plan, how much is attributable to termination benefit and short-term benefit
respectively? __________________

3. On September 1, 2012, Howe Company offered special termination benefits to

employees who had reached the early retirement stage specified in the entitys
pension plan. The termination benefits consisted of lump sum and periodic future
payments.

Additionally, the employees accepting the entity offer receive the usual early
retirement pension benefits. The offer expired on November 30, 2012. Actual or
reasonably estimated amounts on December 31, 2012 relating to the employees
accepting the offer are as follows:
Lump sum payments made on January 1, 2013 475,000
PV of periodic payments of P60,000 annually for 3 years 155,000
(which will begin January 1, 2014)
Reduction of accrued pension cost on December 31, 2012 for the 45,000
 terminating employees

3.1. On December 31, 2012, what amount should be reported as total liability for
termination benefits? __________________
3.2. What amount should be reported as loss on termination benefits in 2012?
__________________

4. West Company determined that it has an obligation relating to employees rights to

receive compensation for future absences attributed to employees services already
rendered. The obligation relates to rights that vest, and payment of the
compensation is probable. The entitys obligations on December 31, 2012 are
reasonably estimated as follows:
Vacation pay 1,200,000
Sick pay 800,000
In the December 31, 2012, statement of financial position, what amount should West
Company report as liability for compensated absences? __________________

5. F Company holds the following records for the current year:

Fair value of plan assets, beginning 500,00

0
Projected benefit obligation, beginning 300,00
0
Past service cost 20,000
Current service cost 40,000
Contribution to the plan 50,000
Benefits paid to employees 50,000
Settlement price of obligation settled (PV of the PBO was 90,000) 800,00
0
Actuarial loss 4,000
Remeasurement gain on plan assets 4,000
Discount rate 12%

5.1. What is the journal entry to record the employee benefit expense?
__________________
 5.2. If there is an asset ceiling, beginning of P200,000 and asset ceiling, ending of
P550,000, what would be the amount of prepaid/accrued benefit cost to be
reported in the statement of financial position? __________________

6. E Company provides an incentive compensation plan under which its president

receives a bonus equal to 15% of Es profit before deducting the bonus and tax. Es
profit after tax and after bonus for the year is P2,545,456. Income tax rate is 30%.
How much is the bonus? __________________

7. G Company had the following information on December 31, 2017:

Fair value of plan assets 8,000,000
Discount rate 10%
Return on plan assets 500,000
Benefits paid 400,000
PV of PBO settled 500,000
Settlement loss on obligation settled 100,000
Contribution to the fund 1,500,000
Assuming there is no change in actuarial assumptions, what is the amount to be
credited to other comprehensive income? __________________

8. H Company had the following information for the year 2017:

Projected benefit obligation, 1/1/17 1,000,000
Expected rate of return 10%
Past service cost 100,000
Current service cost 200,000
Benefits paid 250,000
Settlement price of obligation settled 175,000
Settlement loss on obligation settled 25,000
Increase in PBO due to change in actuarial assumption 50,000
If net interest expense is P75,000, how much was the beginning prepaid/accrued
benefit cost? __________________

9. I Company provided the following information on December 31, 2016:

 Current service cost 520,000
Actual return on plan assets 810,000
Interest expense on PBO 590,000
Interest income on plan assets 150,000
Loss on plan settlement 240,000
Past service cost during the year 360,000
Contribution to pension fund 950,000
9.1. What portion (total amount) of these items will be added to the projected benefit
obligation? __________________
9.2. What is journal entry to record the related employee benefit expense?
__________________

10. J Company had the following information relating to employee benefits for the year
2016:
Benefits paid to employees 500,000
Contribution to the plan
100,000
Current service cost 700,000
Settlement price of obligation settled 400,000
Fair value of plan assets, 12/31/16 4,600,000
Interest income (5/6 of interest expense) 450,000

The final entry related to this included a debit to employee benefit expense at P700,000
and a credit to prepaid/accrued benefit cost at P700,000. The projected benefit
obligation had a net increase of P300,000 for the year.

10.1. What is the rate used to compute for interest? __________________

10.2. What is the actuarial gain or loss (if any)? __________________
10.3. What is the ending balance of projected benefit obligation? __________________

"Things work out best for those who make the best of how things work out." - John
Wooden