ACC 108: Employee Benefits (Theory)

Multiple Choice
17 of 25 points
Select the correct answer from the choices.

Which of the following is not an issue in accounting for defined benefit plans?
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The amount of pension expense to be recognized.

The amount of pension liability to be reported.
The amount of funding (contributions) required by the plan.
Disclosures needed to supplement the financial statements.
None of the above.

Feedback

The contribution to the retirement plan has no required amount under the defined benefit plan. All other matters are an issue in accounting for
defined benefit plans.

3RACHA Company follows the practice of paying all employees for vacation. The company policy provides that the vacation pay
is not vested, but it carries over for one (1) year only if unused.

Under IAS 19, the obligation for earned but unused vacation should be________
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accrued as a current liability.

disclosed as a contingent liability.
ignored until incurred.
accrued or not accrued according to the judgment of management.
None of the above.

Correct answer
ignored until incurred.

Feedback

This is an example of non-accumulating compensated absences. If the compensated absence expires (meaning, non-accumulating), the liability is
only recognized upon incurrence.

It is the excess of the fair value of plan assets over the present value of the defined benefit obligation.
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Surplus
Accrued benefit cost
Excess of fair value over obligation
Unrecognized past service sot
None of the above.

The resulting asset under a defined benefit plan must not exceed the _____
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unrecognized past service cost.

unrecognized net actuarial losses.
total of the unrecognized past service cost and net actuarial losses.
the present value of available future refunds or reductions in future contributions.
None of the above.

Correct answer
the present value of available future refunds or reductions in future contributions.

When a company adopts a pension plan, the past service costs should be charged to _____
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operations of current and future periods.

other comprehensive income in the period of adoption of the plan.
profit or loss in the period of adoption of the plan.
retained earnings.
None of the above.

Correct answer
profit or loss in the period of adoption of the plan.

Under IAS 19, Employee Benefits, post-employment employee benefits include _____
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termination benefits.
equity-compensation benefits.
short-term employee benefits.
retirement benefits, such as pensions.
None of the above.

Feedback

Termination and short-term benefits belong to a different category of employee benefits.

Equity compensation benefit is covered by IFRS 2, Share-Based Payment.

Correct answer is retirement benefits.

It is the increase in the present value of the defined benefit obligation resulting from employee service in the current period.
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Past service cost

Interest cost
Current service cost
Actuarial gains or losses
None of the above

Feedback

This defines the current service cost.

Which of the following defined benefit pension plan disclosures should be made in a company's financial statements?

1. An explanation of the characteristics of an entity's defined benefit plans, and the associated.
2. Risks identification and explanation of the amounts arising in the financial statements from defined benefit plans.
3. A description of how defined benefit plans may affect the amount, timing and uncertainty of the entity's future cash flows.
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1, 2, and 3
1 only
2 only
3 only
None of the above.

Which of the following statements characterizes defined contribution plans?

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They are more complex in construction than defined benefit plans.

The employer's obligation is satisfied by making the appropriate amount of periodic contribution.
The investment risk is borne by the employer.
Contributions are made in equal amounts by employer and employees.
None of the above.

Feedback

Defined benefit plan is more complex in construction than defined contribution plan.
The employee borne the investment risk in defined contribution plan.
The employee's contribution in the retirement plan is neither a characteristic of a defined contribution plan nor of a defined benefit plan.

The answer is C.

Interest cost included in the net pension cost recognized by an employer sponsoring a defined benefit pension plan represents the
_____
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amortization of the discount on unrecognized prior service costs.
increase in the fair value of plan assets due to the passage of time.
increase in the projected benefit obligation due to the passage of time.
shortage between the expected and actual returns on plan assets.
None of the above.

If the actual return on pension fund assets exceeds the expected return for the period, the difference is _____
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recognized as a loss in the other comprehensive income.

recognized as a gain in the other comprehensive income.
recognized as a loss in the profit or loss.
recognized as a gain in the profit or loss.
None of the above.

Correct answer
recognized as a gain in the other comprehensive income.

These are the entity's best estimates of the variables that will determine the ultimate cost of providing post-employment benefits.
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Actuarial assumptions
Demographic assumptions
Financial assumptions
Actuarial computations
None of the above.

Feedback

Demographic and financial assumptions are too specific. These only comprise the actuarial assumptions which are already described in the
question.

These are short-term compensated absences that are carried forward and can be used in future periods if the current period's
entitlement is not used in full and the employees are entitled to a cash payment for unused entitlement on leaving the entity.
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Accumulating and vesting

Accumulating and non-vesting
Non-accumulating and vesting
Non-accumulating and non-vesting
None of the above.

Feedback

Accumulating - those that can be carried forward and used in future periods.
Vesting - unused entitlement are paid in cash when the employee resigns. Otherwise, it is non-vesting.

Non-accumulating - those that expire if not used in certain period and are not paid in cash when the employee resigns.

These are all forms of consideration given by any entity in exchange for service rendered by employees.
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Salaries and wages

Employee benefits
Fringe benefits
Employee Compensation
None of the above.

Feedback

This defines employee benefits.

These are assets held by an entity, the fund itself, that is legally separate from the reporting entity and exists solely to pay or fund
employee benefits.
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Plan assets
Trust fund
Retirment fund
Pension fund
None of the above.

It is an insurance policy issued by an insurer that is not a related party of the reporting entity where the proceeds of the policy can be
used only to pay employee benefits.
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Qualifying insurance policy

Participating insurance policy
Individual premium policy
No cheating policy
None of the above.

Which of the following is a component of amount to be recognized in profit or loss under a defined benefit plan?

1. Current service cost and interest cost

2. The difference between the expected return on plan assets and the actual return on plan assets.
3. The effect of any curtailments or settlements.
4. Past service costs.
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1 and 2
2 and 3
3 and 4
1 and 4
1, 2 and 4

Correct answer
1 and 4

Feedback

1 and 4 are recognized in the profit or loss.

2 and 3 are recognized in the other comprehensive income.

Short term employee benefits include which of the following?

1. Wages, salaries, and social security contributions

2. Medical care, housing, cars and free or subsidized goods or services
3. Profit sharing and bonuses
4. Paid annual leaves and paid sick leaves
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1 and 2
2 and 3
3 and 4
1, 3, and 4
1, 2, 3, and 4

Feedback

All are short-term employee benefits.

Which of the following components of the defined benefit costs shall be recognized in other comprehensive income?

1. Service cost
2. Remeasurement of the net defined benefit liability (asset)
3. Net interest on the net defined benefit liability (asset)
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1, 2, and 3
1 only
2 only
3 only
None of the above.
Correct answer
2 only

Which statement/s is/are correct concerning past service cost?

1. The past service cost should be expensed immediately when additional benefits vest immediately.
2. If the additional benefits are not vested, the past service cost is amortized on a straight-line basis over the period until the benefits
become vested.
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1 only
2 only
Both 1 and 2
Neither 1 nor 2
Sir, I don't know. I am so sorry.

Correct answer
1 only

Which of the following components should not be included in the calculation of the net pension cost recognized for the period by an
employer sponsoring a defined benefit plan?
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Expected return on plan assets

Interest cost
Past service cost
Contribution to the fund
None of the above.

Which statement is not valid concerning a defined benefit plan?

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The defined benefit plan must be fully funded.

The defined benefit obligation is measured on a discounted basis.
The expense recognized is not necessarily the amount of contribution.
Actuarial assumptions are required to measure the defined benefit obligation.
All choices are valid.

Feedback

Defined benefit plan may not be necessarily fully funded every reporting period.
The defined obligation is measured at present value, hence, discounted. It is only determined using the actuarial valuation method called projected
unit credit method.
The amount of contribution to the defined benefit plan is not always equal to the expense recognized in the period.
Actuarial assumptions are required to measure the defined benefit obligation.

Which of the following statements characterizes defined benefit plans?

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They are comparatively simple in construction and raise few accounting issues for employers.
Retirement benefits are based on the plan's benefit formula.
Retirement benefits depend on how well pension fund assets have been managed.
All of the above.
None of the above.

Feedback

Defined benefit plans are complex in nature. They may raise accounting issues for employers if not properly addressed. The retirement benefits, in
general, depend on the service rendered by the employees -- not how well pension fund assets have been managed.

Which is incorrect concerning a defined contribution plan?

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The contribution should be recognized as expense in the period it is payable.

An entity shall not disclose the amount recognized as expense.
Any unpaid contribution at the end of the period should be recognized as accrued liability.
Anny excess contribution should be recognized as prepaid expense.
None of the above.

Feedback

An entity is not restricted to disclose the expense of the defined contribution plan in the financial statements.

The vested benefits are employee benefits ______

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accumulated in the hands of a trustee.

that are contingent upon future employment.
that are not contingent upon future employment.
that are to be paid to retired employees in the current period.
All of the above are correct.

Correct answer
that are not contingent upon future employment.

Feedback

Since vested benefits are accumulated benefits until the employee leaves the company, it is not considered contingent once the benefits accumulate.

The vested benefits do not necessarily accumulate in the hands of a trustee nor do they pay retired employees in the current period. Vested benefits
can still be paid in the future, even if the employee is not yet retired in the company, as long as the employee exercises their right to the benefits.

Essay
5 of 5 points
Provide your answers in the designated field.

Quilgo Test ID*

This question is filled automatically ✋ DO NOT EDIT OR REMOVE

Imagine you are stuck in an island but One Piece Company found you. However, One Piece Company is also searching for an
accountant who would assist them in their financial journey. One Piece Company has only one remaining room in their ship. They will
only allow you to join their team if you answer their question.

To get saved by being stuck in an island, the question asked by One Piece Company is: What are the four main categories of employee
benefits under IAS 19?

(1 point each and 5 points if you answered all correctly)

List your answer like the following:

1. Answer A..
2. Answer B..
3. Answer C...
5/5

1. SHORT-TERM EMPLOYEE BENEFITS 2. POST-EMPLOYMENT BENEFITS 3. OTHER LONG-TERM EMPLOYEE BENEFITS 4.

TERMINATION BENEFITS

BAM 199: Employee Benefits (Problem)

Paldea Corporation grants 10 days of sick leave and 10 days of vacation leave for each complete year of service rendered by its
employees. Unused sick leave does not accumulate but unused vacation leave may be carried forward. Employees are compensated
at the rate in effect at the time of leave. The following data were taken from the records of Paldea Corporation.

Use the table in the picture for the question below.

How much is the liability for compensated absences as of December 31, 2023?
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Php 31,150
Php 22,430
Php 21,340
Php 9,650
None of the above.

Paldea Corporation grants 10 days of sick leave and 10 days of vacation leave for each complete year of service rendered by its
employees. Unused sick leave does not accumulate but unused vacation leave may be carried forward. Employees are compensated
at the rate in effect at the time of leave. The following data were taken from the records of Paldea Corporation.

Use the table in the picture for the question below.

How much is the expense recognized for compensated absences for the year endedDecember 31, 2023?
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Php 37,940
Php 29,220
Php 22,250
Php 15,690
None of the above.

Correct answer
Php 37,940

Quaxly Corporation grants all employees two weeks 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 were taken or when
employment is terminated. During 2023, there was no employee turnover. Quaxly Corporation granted a 10% across-the-board salary
increase to all employees on October 1, 2023, its annual salary increase date. Information relating to the year ended December 31,
2023 are presented in the picture below.

How much is the vacation pay expense for the year ended December 31, 2023?
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Php 61,000
Php 41,000
Php 40,000
Php 39,000
None of the above.

Quaxly Corporation grants all employees two weeks 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 were taken or when
employment is terminated. During 2023, there was no employee turnover. Quaxly Corporation granted a 10% across-the-board salary
increase to all employees on October 1, 2023, its annual salary increase date. Information relating to the year ended December 31,
2023 are presented in the picture below.

What amount is reported as liability for vacation pay at Quaxly Corporation in its balance sheet?
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Php 61,000
Php 60,000
Php 51,000
Php 41,000
None of the above.

Yeji Company provides retirement benefits to employees through defined contribution plan. The plan provides that Yeji Company shall
contribute annually 9% of gross payroll to a funding agency. In addition, the entity is also required to contribute 6% of annual sales
exceeding Php 15,000,000. During 2023, gross payroll of the company was Php 6,500,000 and total sales amounted to Php
32,000,000.

How much is the retirement benefit expense taken to profit or loss for the year 2023?
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Php 1,605,000
Php 1,485,000
Php 1,020,000
Php 585,000
None of the above.

Yeji Company provides retirement benefits to employees through defined contribution plan. The plan provides that Yeji Company shall
contribute annually 9% of gross payroll to a funding agency. In addition, the entity is also required to contribute 6% of annual sales
exceeding Php 15,000,000. During 2023, gross payroll of the company was Php 6,500,000 and total sales amounted to Php
32,000,000.

Assuming further that during 2016, the company contributed Php 1,700,000 to the trustee. How much is the prepaid asset or accrued
benefit arising from the transaction.
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Php 95,000 accrued

Php 95,000 prepaid
Php 680,000 accrued
Php 680,000 prepaid
None of the above.

Zelda Company showed in its memorandum records of the following balances for the year 2023. See the picture below.

What is the actual return on pension plan assets?

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Php 150,000
PHp 460,000
Php 495,000
Php 550,000
None of the above.

Correct answer
Php 550,000

Zelda Company showed in its memorandum records of the following balances for the year 2023. See the picture below.

What is the amount of actuarial gain or loss that will be taken to other comprehensive income?
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Php 90,000 loss

Php 90,000 gain
Php 35,000 loss
Php 35,000 gain
None of the above.

Correct answer
Php 90,000 gain

The picture below relates to the defined benefit obligation for the Hades Inc.

Service cost for 2023 would be...

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Php 226,500
Php 262,500
Php 219,500
Php 291,500
None of the above.

Correct answer
Php 291,500

The picture below relates to the defined benefit obligation for the Hades Inc.

The actual return on plan assets for 2023 is...

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Php 105,000
Php 495,000
Php 503,500
Php 512,000
None of the above.

The picture below relates to the defined benefit obligation for the Hades Inc.

What is the retirement benefit expense reported in the profit or loss for 2023?
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Php 224,000
Php 242,000
Php 248,000
Php 284,000
None of the above.

The picture below presents the data available for Cat Inc's defined benefit plan for 2023.

What is Cat Inc's benefit obligation as of December 31, 2023?

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Php 11,480,000
Php 11,080,000
Php 10,680,000
Php 10,580,000
None of the above.

Correct answer
Php 10,680,000

The picture below presents the data available for Cat Inc's defined benefit plan for 2023.

How much is the retirement benefit expense for 2023 taken to profit or loss?
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Php 3,380,000
Php 3,080,000
Php 2,780,000
Php 2,580,000
None of the above.

The picture below presents the data available for Cat Inc's defined benefit plan for 2023.

How much is the fair value of plan assets as of December 31, 2023?
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Php 11,300,000
Php 11,000,000
Php 10,900,000
Php 10,000,000
None of the above.

The picture below presents the data available for Cat Inc's defined benefit plan for 2023.

How much is the defined benefit liability (asset) to be reported in the 2023 financial statements?
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Php 220,000 liability
Php 220,000 asset
Php 80,000 liability
Php 80,000 asset
None of the above.

Correct answer
Php 220,000 asset

Bonus if you answer correctly: What is the journal entry upon the payment of the benefits to the retirees of an entity under a defined
benefit plan? Why?

If you answer this correctly, this will be added to your total score without adjustment to the denominator.

net define benefit liability cash to record the payment of the benefit

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