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Q2 Employee Benefits Pt.2
Q2 Employee Benefits Pt.2
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? __________________
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?
__________________
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? __________________
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.
"Things work out best for those who make the best of how things work out." - John
Wooden