PHILIPPINE REVIEW INSTITUTE FOR ACCOUNTANCY, INC

MAY 2020 CPALE (BATCH NO. 05)

Financial Accounting and Reporting (FAR) Nenita S. Robles/ Floyd C. Paguio

EMPLOYEE BENEFITS (2011)

(PAS 19)
CLASSROOM DISCUSSION QUESTIONS
Short-term compensated absences
1. Required:
1. Determine the accrued vacation and sick leave benefits as of January 1, 20A1, December 31, 20A1, and the amount
of used vacation and sick leave benefits in 20A1.
2. Assume that the sick and vacation leave credits are not allowed to be carried over in the subsequent year. Prepare
all the journal entries for 20A1 in the books of PRIA.

Notes and solution

Requirement No. 1
Days Daily rate, Amount
Employee accrued 20A1 accrued

Andres 30 1,200 36,000

Bayani 25 1,500 37,500
Crisanto 20 1,100 22,000
Damian 5 1,000 5,000
ElPAS 45 1,400 63,000
Frito 1,250 -

Accrued, January 1, 20A1 163,500

Days Days Daily

accrued, Days accrued, rate, Amount
Employee Jan Days earned taken Balance Dec 20A2 accrued
Andres 30 25 35 20 20 1,320 26,400
Bayani 25 25 20 30 30 1,650 49,500
Crisanto 20 12 12 20 20 1,210 24,200
Damian 5 25 20 10 10 1,100 11,000
ElPAS 45 25 15 55 50 1,540 77,000
Frito 0 13 6 7 7 1,375 9,625
Accrued, December 31, 20A1 197,725

Days Daily rate, Amount

Employee taken 20A1 paid
Andres 35 1,200 42,000
Bayani 20 1,500 30,000
Crisanto 12 1,100 13,200
Damian 20 1,000 20,000
ElPAS 15 1,400 21,000
Frito 6 1,250 7,500
Amount paid, 20A1 133,700

Vacation and sick leave benefits payable 133,700

Cash 133,700

Vacation and sick leave benefits expense 167,925

Vacation and sick leave benefits payable 167,925

Requirement No. 2

Vacation and sick leave benefits expense 121,700

Cash 121,700

Days Paid Daily rate, Amount

Employee taken Maximum leave 20A1 paid

PRIA: Employee Benefits (HO. No. 15)

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 PHILIPPINE REVIEW INSTITUTE FOR ACCOUNTANCY, INC
MAY 2020 CPALE (BATCH NO. 05)
Financial Accounting and Reporting (FAR) Nenita S. Robles/ Floyd C. Paguio

Andres 35 25 25 1,200 30,000

Bayani 20 25 20 1,500 30,000
Crisanto 12 25 12 1,100 13,200
Damian 20 25 20 1,000 20,000
ElPAS 15 25 15 1,400 21,000
Frito 6 25 6 1,250 7,500
Amount paid, 20A1 121,700

Profit sharing and bonus plans

2. Required: Compute the amount of bonus using the cases below
a. Bonus is computed before bonus and before tax
b. Bonus is computed after bonus and before tax
c. Bonus is computed before bonus and after tax
d. Bonus is computed after bonus and after tax

Notes and solution

a. 100,000 x 10% = 10,000

b. 100,000 – 1,000,000/ 110% = 9,091
c. 100,000 x (1 – 30%)/ (1/10% - 30%) = 7,217
d. 100,000 x (70%)/ (10 – 30% + 1) = 6,542

Defined contribution plans

3. Required:
1. Prepare all the journal entries for 20A1 and 20A2 in the books of PRIA.
2. Determine the carrying amount of Prepaid/accrued pension cost as of December 31, 20A1 and December 31, 20A2.

Notes and solution

Requirement No. 1

20A1 Pension expense 400,000

Prepaid/Accrued pension cost 400,000

Prepaid/Accrued pension cost 300,000

Cash 300,000

20A2 Pension expense 550,000

Prepaid/Accrued pension cost 550,000

Prepaid/Accrued pension cost 700,000

Cash 700,000

Requirement No. 2

Carrying amount of Prepaid/Accrued pension cost

Dr Cr

December 31, 20A1 100,000

December 31, 20A2 50,000

Current service cost; interest cost; past service cost; lump sum pension payment
4. Required:
1. Determine PRIA’s projected benefit obligation (PBO) as of January 1, 20A1 with respect to John Bo.
2. Determine the portion of John Bo’s annual retirement payments attributable to 20A1 service.
3. Determine PRIA’s current service cost and interest cost, and the amount of pension cost to be charged to profit
and loss for the year ended December 31, 20A1 with respect to John Bo.
4. Determine PRIA’s projected benefit obligation (PBO) as of December 31, 20A1 with respect to John Bo.
5. Determine PRIA’s past service cost as of January 1, 20A2 with respect to John Bo after the amendment.
6. Determine PRIA’s current service cost and interest cost, and the amount of pension cost to be charged to profit
and loss for the year ended December 31, 20A2 with respect to John Bo.
7. Determine PRIA’s projected benefit obligation (PBO) as of December 31, 20A2 with respect to John Bo.

PRIA: Employee Benefits (HO. No. 15)

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 PHILIPPINE REVIEW INSTITUTE FOR ACCOUNTANCY, INC
MAY 2020 CPALE (BATCH NO. 05)
Financial Accounting and Reporting (FAR) Nenita S. Robles/ Floyd C. Paguio

Requirement No. 1

Annual salary 1,000,000

FV factor, 8%, 20 years 4.6610
Future salary after 20 years 4,661,000
Rate of pension 5%
Pension benefit for one year service 233,050
Years of service 15
Total pension 3,495,750
PV factor, 7%, 20 years 0.2584
PBO, Jan 1 903,302

Requirement No. 2

Future salary after 20 years 4,661,000

Rate of pension 5%
Pension benefit for one year service 233,050
Year of service for 20A1 1
Pension for 20A1 service 233,050

Requirement No. 3
Current service cost
Pension for 20A1 service 233,050
PV factor, 7%, 19 years 0.2765
Current service cost 64,438

Interest cost
Projected benefit obligation, Jan 1 903,302
Discount rate 7%
Interest cost 63,231

Amount charged to P&L 127,669

Requirement No. 4

PBO, Jan 1 903,302

Current service cost 64,438
Interest cost 63,231
PBO, Dec 31 1,030,971

Check:

Pension benefit for one year service 233,050

Years of service 16
Total pension 3,728,800
PV factor, 7%, 19 years 0.2765
PBO, Dec 31 1,030,971 (42)

Requirement No. 5

Future salary after 20 years 4,661,000

Rate of pension 1%
Pension benefit for one year service 46,610
Years of service 16
Total pension 745,760
PV factor, 7%, 19 years 0.2765
Past service cost 206,245

PRIA: Employee Benefits (HO. No. 15)

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 PHILIPPINE REVIEW INSTITUTE FOR ACCOUNTANCY, INC
MAY 2020 CPALE (BATCH NO. 05)
Financial Accounting and Reporting (FAR) Nenita S. Robles/ Floyd C. Paguio

Check:

Future salary after 20 years 4,661,000

Rate of pension 6%
Pension benefit for one year service 279,660
Years of service 16
Total pension 4,474,560
PV factor, 7%, 19 years 0.2765
PBO, after amendment 1,237,216
PBO, before amendment 1,030,971
Past service cost 206,245

Requirement No. 6
Current service cost
Pension for 20A2 service 279,660
PV factor, 7%, 18 years 0.2959
Current service cost 82,751

Interest cost
Projected benefit obligation, Jan 1 1,237,216
Discount rate 7%
Interest cost 86,605
Past service cost 206,245

Amount charged to P&L 375,601

Requirement No. 7

PBO, Dec 31, 20A1 1,030,971

Past service cost 206,245
Current service cost 82,751
Interest cost 86,605
PBO, Dec 31 1,406,572

Check:
Pension benefit for one year service 279,660
Years of service 17
Total pension 4,754,220
PV factor, 7%, 18 years 0.2959
PBO, Dec 31 1,406,572 (243)

Defined benefit plan, remeasurement OCI

5. Required:
1. Employee benefit expense to be recognized in the statement of income.
2. Net remeasurement gain (loss).
3. PBO – December 31, 20x1
4. FVPA – December 31, 20x1
5. Journal entry

Notes and solution

General Journal Debit (Credit)
Remeasure- Benefit
ment OCI expense Cash FVPA PBO
P&L
Balances – Jan. 1 5,000,000 (7,000,000
Current service cost 1,200,000 (1,200,000)
Past service cost 300,000 (300,000)
Interest expense on PBO 700,000 (700,000)

PRIA: Employee Benefits (HO. No. 15)

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 PHILIPPINE REVIEW INSTITUTE FOR ACCOUNTANCY, INC
MAY 2020 CPALE (BATCH NO. 05)
Financial Accounting and Reporting (FAR) Nenita S. Robles/ Floyd C. Paguio

Interest income on FVPA (500,000) 500,000

Contribution to the plan (1,000,000) 1,000,000
Benefits paid (500,000) 500,000
Actuarial loss on PBO 900,000 (900,000)
Remeasurement gain on plan assets (300,000) 300,000

Balances – Dec. 31 600,000 1,700,000 (1,000,000) 6,300,000 (9,600,000)

(2) (1) (4) (3)

20x1
Dec. 31
Employee benefits expense 1,700,000
Net remeasurement loss – OCI 600,000
Cash 1,000,000
Prepaid/ accrued benefit cost 1,300,000

DO-IT-YOURSELF (DIY)

1. C 11. A 21. B
2. C 12. C 22. C
3. B 13. D 23. A
4. B 14. B 24. C
5. C 15. D 25. C
6. D 16. A 26. A
7. B 17. D 27. A
8. A 18. A 28. B
9. D 19. C 29. A
10. A 20. D 30. A

***

"Stop chasing the money and start chasing the passion."

-- Tony Hsieh

PRIA: Employee Benefits (HO. No. 15)

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