Module 4 Assessment Task- Employee Benefits
Assessment Task 4 – 1 (Millan, 2019)
1. It refers to a plan where plan assets, if any, are retained and managed
by the employer.
a. Funded plan c. Unfunded plan b. Non-contributory plan d. Delicate
plan
2. These are pool of assets contributed by various unrelated employers
to be used to pay retirement benefits to participants without regard to
the identity of the contributing employers.
a. Multi-employer plans c. Pooling of assets plan b. State plans d. Secret
plan
3. Multi-employer plans are treated as
a. Defined contribution plan c. Hybrid plan b. Defined benefit plan d. a
or b
4. These are established by legislation and are operated by a
government agency which is not subject to control or influence by the
reporting entity.
a. State plans b. SSS c. GSIS d. Puro plan
5. State plans are
a. accounted for as defined contribution plan
b. accounted for as defined benefit plan
c. accounted for in the same way as multi-employer plans
d. accounted for only by the Commission on Audit
6. The accounting for defined contribution plan
a. is straightforward – actuarial computations are not required.
b. is complex – actuarial computations are required
c. is simple – not accounted for
d. is done only by CPA
7. Under a defined contribution plan, the retirement benefits expense is
a. equal to an actuarially determined amount
b. equal to the agreed periodic contribution to the fund
c. equal to the contribution made during the period
d. zero, if no employee retired during the period
8. Employee benefits are all forms of consideration given by an entity in
exchange for service rendered by employees. Which of the following
employee benefits is not within the scope of PAS 19?
a. Short-term
d. Termination
b. Post-employment
e. Share-based payments
c. Other long-term
9. Which of the following employee benefits is not within the scope of
PAS 19?
a. Semi-monthly salaries of employees
b. Employer’s share in SSS contributions
c. One sack rice allowance
d. Bonus in the form the entity’s shares
10. Accumulating compensated absences are those that
a. can be carried over to the next period if not fully used during the year
of entitlement.
b. expire if not fully used during the year of entitlement.
c. can be carried over to the next period if not fully used during the year
of entitlement and are paid in cash when the employee leaves the
company
d. are recognized only when actually taken by employees
11. The last payday for a firm was December 27 on which it paid ₱40,000
to its employees, the amount earned by employees through the pay
period ending December 16. For the period December 17 through
December 31, the employees earned ₱12,000.The adjusting entry
required at December 31 would include:
a. cr. crash ₱12,000
b. dr. wages payable ₱12,000
c. dr. wages expense ₱12,000
d. dr. wages expense ₱40,000
12. Gavin Co. grants all employees two weeks of paid vacation for each
full year of employment. Unused vacation time can be accumulated and
carried forward to succeeding years and will be paid at the salaries in
effect when vacations are taken or when employment is terminated.
There was no employee turnover in 20X6. Additional information
relating to the year ended December 31, 20X6, is as follows:
Liability for accumulated vacations at 12/31/X5 P35,000
Pre-20X6 accrued vacations taken from 1/1/X6 to 9/30/X6 (the
authorized period for vacations) 20,000
Vacations earned for work in 20X6 (adjusted to current rates) 30,000
Gavin granted a 10% salary increase to all employees on October 1,
20X6, its annual salary increase date. For the year ended December 31,
20X6, Gavin should report vacation pay expense of
a. 45,000 b. 33,500
c. 31,500 d. 30,000
13. ANOMALOUS IRREGULAR Co. grants its employees twelve days paid
vacation leave each year. Per ANOMALOUS’s policy, employees are
required to take vacation leave each year, but not necessarily for their
entire vacation leave entitlement. Vacation leaves not taken during a
year can be carried over indefinitely.
ADHERE has 500 employees with an average salary of ₱4,000 per day.
The average annual pay increase is 5%. During 20x1, total vacation
leaves taken by employees were 5,400 days. Based on past experience,
90% of unused vacation leave for a year are taken in the immediately
following year.
If unused vacation leaves vest, how much should ANOMALOUS accrue as
liability for unused vacation leave on December 31, 20x1?
2,520,000 b. 25,200,000 c. 2,268,000 d. 0
Use the following information for the next four questions:
ADHERE TO STICK Co. grants its managerial employees bonus in the
form of profit sharing. Information on operations in 20x1 is shown
below:
Profit before tax ₱4,000,000
Bonus rate or percentage 10%
Income tax rate 30%
14. How much is the bonus “before bonus and before tax?”
a. 363,636 b. 280,000 c. 400,000 d. 288,660
15. How much is the bonus “after bonus and before tax?”
a. 400,000 b. 363,636 c. 261,684 d. 245,798
16. How much is the bonus “before bonus and after tax?”
a. 363,636 b. 261,684 c. 245,798 d. 288,660
17. How much is the bonus “after bonus and after tax?”
a. 363,636 b. 261,682 c. 245,798 d. 288,660
18. ARTIFACT MAN MADE OBJECT Co. provides an incentive
compensation plan under which its president receives a bonus equal to
10% of ARTIFACT’s profit before tax but after deduction of the bonus.
ARTIFACT’s profit after tax and after bonus for the year is ₱2,545,456.
Income tax rate is 30%. How much is the bonus?
a. 245,798 b. 261,684 c. 363,636 d. 288,660
Use the following information for the next two questions:
AMNESTY PARDON Co. has a post-employment benefits plan that is
considered as defined contribution plan. According to the plan,
AMNESTY agrees to contribute ₱800,000 annually to a retirement fund
for the benefit of its employees.
On December 31, 20x1, because of poor results of operations and
insufficient working capital, AMNESTY was only able to contribute
₱320,000 to the fund. On December 31, 20x2, because of a profitable
year, AMNESTY decided to contribute ₱1,800,000 to the retirement
fund. On January 12, 20x3, an employee retired and was eligible to a
₱60,000 retirement benefits based on the operating efficiency and
investment earnings of the fund.
19. How much is the retirement benefits expense recognized in 20x2?
a. 800,000 b. 320,000 c. 1,800,000 d. 60,000
20. How much is the retirement benefits expense recognized in 20x3?
a. 800,000 b. 320,000 c. 1,800,000 d. 60,000
Assessment Task 4 – 2 (Millan, 2019)
Module 4 Assessment Task- Employee Benefits
1. Which of the following components should be included in the calculation PV of defined benefit obligation, January 1 P4,600,000
of net defined benefit cost recognized for a period by an employer PV of defined obligation, December 31 4,729,000
sponsoring a defined benefit pension plan? Fair value of plan assets, January 1 5,035,000
Actual Return Amortization of Unrecognized prior Fair value of plan assets, December 31 5,565,000
If Any Cost on service cost, If Any Interest Cost Interest income on plan assets 450,000
a. No No Yes Actuarial loss 32,500
b. Yes No Yes Employer contributions 425,000
c. Yes Yes No Benefits paid to retirees 390,000
d. Yes Yes Yes Discount rate 10%
2. Which of the following concepts for postretirement benefit plans is The net amount of remeasurement of the net defined benefit liability (asset)
comparable to the projected unit credit method of pension plans? included in the defined benefit cost for 2002 would be
a. Accrued benefit method pro-rated on service a. 77,500.
b. Expected Postretirement Benefit Obligation (EPBO) b. 47,500.
c. Actual return on plan assets c. 32,500.
d. Expected return on plan assets d. 12,500.
3. Which of the following statements is incorrect? (Explanation: Gains or 12. Flash Inc. has a defined benefit plan for its employees. The following
losses on the settlement of a defined benefit plan are recognised when the information relates to this plan:
settlement occurs. [IAS 19(2011).110]) Present value of defined benefit obligation, January 1, 2002 10,000,000
a. Minimum (corridor) amortization of net unrecognized gain or loss is Fair value of plan assets, January 1, 2002 10,400,000
allowed for postretirement benefit plans. Service cost - 2002 800,000
b. Gains and losses on settlement of defined benefit retirement plans are Actual return on plan assets - 2002 900,000
recognized immediately. Discount rate based on high quality corporate bonds 10%
c. Actuarial gains and losses are recognized immediately. Expected rate of return on assets 8%
d. Past service costs are recognized immediately. An actuarial loss of ₱20,000 was incurred during 2002.
4. The interest cost component of the net defined benefit cost is determined There was no unrecognized prior service cost or unrecognized gains or losses.
using Flash's defined benefit cost for the year was
a. the settlement rate of interest. a. 880,000.
b. the rate of return on high quality corporate bonds b. 920,000.
c. both a and b. c. 640,000.
d. neither a or b. d. 988,000.
5. Financial reporting standards for pension currently in effect 13. Information on EQUANIMITY COMPOSURE Co.’s defined benefit plan is
a. allow both the accrued benefit and projected benefit methods. shown below:
b. allow only the accrued benefit method/ projected unit credit method. PV of defined benefit obligation, Jan. 1 P480,000
c. allow only the projected benefit method. PV of defined benefit obligation, Dec. 31 488,000
d. do not allow either the accrued benefit or projected benefit methods. Interest cost 10% Benefits paid to retirees 200,000
6. Which of the following is not correct? Increase in present value of defined benefit obligation during the year due to
a. PAS 19 does not include any provisions for the recognition of an additional changes in actuarial assumptions 40,000
minimum liability. How much is the current service cost?
b. PAS 19 does not allow for the recognition of a net pension asset equal to a. 120,000
the computed surplus in some circumstances. b. 200,000
c. PAS 19 requires the 10% corridor amount in calculating the amortization c. 160,000
of deferred gains and losses. d. 220,000
d. PAS 19 requires settlement gains and losses to be recognized immediately Use the following information for the next two questions:
as part of comprehensive income. PELLUCID CLEAR Co. agrees to provide lump-sum retirement benefits to
7. These are changes in the present value of the defined benefit obligation employees equal to 6% of final salary for each year of service. Information on
resulting from experience adjustments and the effects of changes in actuarial an employee is shown below:
assumptions. Average annual salary level on January 1, 20x1 P12,000,000
a. Past service cost Average annual salary increase starting January 1, 20x2 and every year
c. Settlement gains and losses thereafter. 3%
b. Actuarial gains and losses (pg. 606) Average service lives before entitlement to retirement benefits (January 1,
d. Interest cost 20x1 to December 31, 20x5)- 5 years
8. All of the following are demographic assumptions except: Discount rate per year 10%
a. future medical costs (Included in financial assumption) 14. How much is the current service cost in 20x2?
b. mortality, both during and after employment a. 553,492
c. rates of employee turnover, disability and early retirement b. 669,724
d. claim rates under medical plans c. 618,724
9. According to PAS 19, which of the following is not a financial assumption? d. 608,840
a. the discount rate 15. How much is the present value of the defined benefit obligation on
b. future salary and benefit levels December 31, 20x2?
c. the expected rate of return on plan assets a. 1,298,437
d. the proportion of plan members with dependents who will be eligible for b. 1,217,680
benefits c. 1,085,710
10. According to PAS 19, the rate used to discount post-employment benefit d. 1,908,117
obligations shall be determined by reference to market yields at the end of
the reporting period on
a. risk-free rate
c. current bank rate
b. high quality corporate bonds
d. effective interest rate
11. The following information relates to the defined benefit pension plan of
the McDonald Company for the year ending December 31, 2002: