Intermediate Accounting 3

Answers to Quiz 1

Note: This file is for BEC 2301-1T and 2T classes’ use only. Do not disseminate otherwise.

THEORIES:
Question1 pt
These are employee benefits that are payable as a result of an entity's decision to terminate
and employee's employment before the normal retirement date, or an employer's decision to
accept an offer of benefits in exchange for termination of employment.
Answer: Termination benefits

Question1 pt
These are compensated absences that are carried forward and can be used in future periods
and the employees are entitled to a cash payment for unused entitlement on leaving the entity.
Answer: Accumulating and vesting

Question1 pt
It is a benefit plan under which an entity pays a fixed contribution into a separate fund and will
have no legal or constructive obligation to pay further contribution if the fund becomes
insufficient to pay employee benefits.
Answer: Defined contribution plan

Question1 pt
Which of the following statements is incorrect about the recognition and measurement of a
defined benefit plan?
Answer: The defined benefit plan must be fully funded.

Question1 pt
It is the increase in the present value of the defined benefit obligation for employee service in
prior periods arising from a plan amendment or curtailment.
Answer: Past service cost
Question1 pt
When an entity amends a pension plan, past service cost should be
Answer: Expensed in the period the plan is amended.

Question1 pt
The return on plan assets
Answer: includes interest, dividends and change in the fair value of the plan assets during the
year.

Question1 pt
Which statement is true concerning the recognition and measurement of a defined contribution
plan?
Answer: All of these statements are true.

Question1 pt
An entity shall offset an asset relating to one plan against a liability relating to another plan
when, and only when, the entity:

1. has a legally enforceable right to use a surplus in one plan to settle obligations under the
other plan
2. intends either to settle the obligations on a net basis, or to realise the surplus in one plan
and settle its obligation under the other plan simultaneously

Answer: Both 1 and 2.

Question1 pt
Retirement benefit plans shall be carried at
Answer: Fair value
STRAIGHT PROBLEMS:

Question3 pts
Avid Company provided the following data relative to a defined benefit plan for the current year:

Compute for the ff:

INPUT FORMAT: No commas/peso sign, use 2 decimal points; ex. 132000.43, (132000.00),
zero.
(1) Actuarial gain (loss) due to change in PBO
(2) Net expense reported in profit or loss
(3) Gain (loss) reported in other comprehensive income
Answer:
1. 171550.00
2. 859000.00
3. 286000.00
Question3 pts
Blimp Co. has established a defined benefit pension plan for an employee. Annual payments
under the pension plan are equal to the employee's highest lifetime salary multiplied by 3%
multiplied by the number of years with the entity.
On December 31, 2020, the employee had worked for Blimp Co. for 15 years. The current
salary is P500,000.
The employee is expected to retire in 5 years and the salary increases are expected to average
4% per year during that period.
The employee is expected to live for 6 years after retiring and will receive the first annual
pension payment at the end of the first year of retirement. The discount rate is 12%
FV of P1 at 4% for 5 periods is 1.217. PV of an ordinary annuity of P1 at 12% for 6 periods is
4.111. PV of P1 at 12% for 5 periods is 0.567.
Compute for:
INPUT FORMAT: No commas/peso sign, use 2 decimal points; ex. 132000.43, (132000.00),
zero. Only round final answers to 2 decimal points.
(1) expected annual benefit payment
(2) CSC for 2020
(3) Projected benefit obligation as of December 31, 2020
Answer:
1. 273825.00
2. 42551.25
3. 638268.82
Question3 pts
At the beginning of the current year, Chin Company had a projected benefit obligation of P10
million and a pension fund with a fair value of P9.2 million.
The entity provided the following information related to the pension plan during the current year:

Compute for the ff:

INPUT FORMAT: No commas/peso sign, use 2 decimal points; ex. 132000.43, (132000.00),
zero.
(1) employee benefit expense for the current year
(2) remeasurement gain (loss) for the current year
(3) net pension asset (liability) at year-end
Answer:
1. 1272000.00
2. (578000.00)
3. (1600000.00)
Question3 pts
Dartmouth Company provided the following information for the current year:

Compute for the ff:

INPUT FORMAT: No commas/peso sign, use 2 decimal points; ex. 132000.43, (132000.00),
zero.
(1) Net remeasurement gain (loss)
(2) FVPA as of end
(3) PBO as of end

Answer:
1. 300000.00
2. 3650000.00
3. 5650000.00
Question3 pts
Emerald Co. gives each of the employees 12 days of vacation a year if they are employed at the
end of the year. The vacation accumulates and may be taken starting January 1 of the next
year. The employees work 8 hours per day.
The employees made P70 per hour in 2020 and P80 per hour in 2021. During 2020, the
employees took an average of 9 days of vacation each.
Used vacation leaves are all settled.
Compute for the ff:
INPUT FORMAT: No commas/peso sign, use 2 decimal points; ex. 132000.43, (132000.00),
zero.
(1) expense related to the benefit in 2020
(2) liability related to the benefit as of 12/31/2020
(3) liability related to the benefit as of 12/31/2020 if the vacation leaves are non-accumulating.
Answer:
1. 348000.00
2. 96000.00
3. zero