Employee Benefits
Employee Benefits
Employee Benefits
Gain Current S.C. I.E. (DBO, beg. x S.R.) R.G./R.L. (on P.A.)
Loss Prior S.C. I.I. (PA, beg. x S.R.) A.G./A.L. (on DBO)
Contribution
1,650,000
1,850,000
150,000
- 170,000
Annual Service Cost 10% of final salary
Discount Rate / Settlement Rate 12%
Current Salary 100,000 1,630,000
Salary is increasing every year by 5%
Vesting period 5 years 220,000
Annual Salary
Year 1 100,000
Year 2 105,000
Year 3 110,250
Year 4 115,763
Year 5 121,551
A director of Ester Company shall receive a retirement benefit of 20% of final salary per annum for a contractual period of 3
years. The anticipated salary is P1,000,000 for 2013, P1,200,000 for 2014 and P1,500,000 for 2015. The discount rate is 10%.
Under the projected unit credit method, what is the estimated pension liability on December 31, 2014?
PV factor PV
12/31/13 300,000 0.83 247,934
12/31/14 300,000 0.91 272,727
12/31/15 300,000 1.00 300,000
Problem 2
Elaine Company adopted a defined benefit plan on January 1, 2017. The pension funding payment is made to the trustee on
December 31 each year.
2017 2018
Service cost 1,500,000 1,650,000
Funding payment 1,700,000 1,850,000
Interest on DBO 150,000
Interest income and actual return on plan assets 170,000
Problem 3
Angela Company provided the following information pertaining to a defined pension plan for the current year:
Problem 4
Greenbelt Company provided the following information with respect to the defined benefit plan for the current year:
Projected benefit obligation
Jan. 1 3,000,000
Dec. 31 3,500,000
Contribution to the plan 600,000
Benefits paid to retirees 500,000
Settlement rate 10%
Problem 5
Bronson Company received the following report from the independent actuary in relation to a defined benefit pension plan a
year-end:
Problem 6
Jelli Company provided the following information relating to a defined benefit plan for the current year:
What amount should be reported as defined benefit cost for the current year?
CSC 1,600,000
AR - 350,000
PSC 50,000
IE 500,000
Defined Benefit Cost 1,800,000
Annual Salary 1,000,000 EBE 100,000
10% Cash
Required Contribution 100,000 Accrued Benefit Cost
EBE 100,000
Actual 90,000 Prepaid benefit cost 20,000
Required Contribution 100,000 Cash
Notes/Off-balance sheet
accounts Plan Assets
B/S
Beg. End
II Settlement
P/ABC DBO Plan Assets
RG/(RL)
Contri.
CSC I.I.
PSC R.G. Actual Return
IE (R.L.)
DBO vs. PA (A.G.) Funding DBO
A.L. Settlement End Beg
Settlement Settlement IE
1,650,000 CSC
1,850,000 PSC
150,000 A.L./(A.G.)
170,000 Journal Entry:
ontractual period of 3
discount rate is 10%.
?
AR 350,000
II 400,000
RL - PA - 50,000
CSC 1,600,000
PSC 50,000
IE 500,000
II - 400,000
RL - PA 50,000
Defined Benefit Cost 1,800,000
90,000
10,000
120,000
1,700,000
1,850,000
Problem 7
Final salary
Janine Company operates a defined benefit plan that pays a lump sum on
termination of service of 8% of final salary for each year of service. Paul joins Annual S.C.
the entity at the start of 2016 at an annual salary of P600,000. Janine
Company's policy provides for an increase in salary of 5% per annum. The
discount rate is 10%. It is expected that Paul will retire after 10 years of CSC - YEAR 1
service. CSC - YEAR 2
Problem 8
2016
Beg.
CSC
IE
II
RL - PA
Contri.
Settlement
End
2017
Beg.
CSC
IE (Beg of DBO x S.R.)
PSC
II
RG - PA
Elizabeth Company adopted a defined benefit plan. The balances as of Contri.
January 1, 2016 were P200,000 for plan assets and P220,000 for the projected
benefit obligation. Other data relating to 3 years' operation of the plan are as Settlement
follows: A.G.
End
2016 2017 2018
Annual service cost 40,000 51,000 66,000 2018
Settlement rate 12% 12% 12% Beg.
Expected rate of return 10% 10% 10% CSC
Actual return on plan assets 16,000 35,000 40,000 IE (Beg of DBO x S.R.)
Annual funding (contributions) 25,000 35,000 55,000 PSC
Benefits paid 15,000 20,000 25,000 II
Prior service cost (plan amended, 1/1/17) 80,000 RG - PA
Change in actuarial assumptions established Contri.
a PBO of ( Dec. 31, 2017-2018) 419,500 518,000 Settlement
Average service years of all employees 10 10 10 A.G.
End
930,000
x 8%
74,400
31,248
34,968
Plan Assets
- Beg. End 28,000
rnal Entries: - II Settlement -
- RG/(RL)
EBE - P/L 31,248 28,000 Contri.
Cash 28,000
ABC 3,248
DBO
EBE - P/L 35,293 31,248 End Beg -
Rem. - OCI 400 - Settlement IE (S.R. x -
Cash 32,000 CSC 31,248
ABC 2,893 PSC -
C 12/31/17 6,141 A.L./(A.G.) -
Plan Assets
Beg. End 346,000 EBE - P/L 83,220
II Settlement 25,000 Rem. Loss - OCI 280
RG/(RL) Cash 55,000
Contri. ABC 28,500
Angela Company provided the following information pertaining to a defined pension plan for the current year:
Problem 4
Bronson Company received the following report from the independent actuary in
relation to a defined benefit pension plan at year-end:
2,160,000
Pension benefits paid 135,000 135,000
PBO at year-end 2,160,000
Interest expense on PBO 120,000
Discount rate 8%
What is the current service cost for the current year? 2,295,000
or the current year:
190,000
380,000
- 400,000
500,000
400,000
DBO
End Beg 3,000,000
Settlement IE 300,000
CSC 700,000
PSC
A.L./(A.G.)
4,000,000
DBO
End Beg 1,500,000
Settlement IE (S.R. x Beg of DBO) 120,000
CSC 675,000
PSC
A.L./(A.G.)
1,620,000
Notes/Off-balance sheet
accounts
CSC I.I.
PSC R.G.
IE (R.L.)
(A.G.) Funding
A.L. Settlement
Settlement
190,000
380,000
400,000
500,000
400,000