Mindanao State University

College of Business Administration and Accountancy

DEPARTMENT OF ACCOUNTANCY
Marawi City

EMPLOYEE BENEFITS
Accounting 122

ASSIGNMENT. Compute for the amount/s asked by each problem. Final answers and
solutions are to be written in yellow sheets of paper. Answers must be summarized first and
written on the first page.
PROBLEM 1: JR Company employs 5 people. Each employee is entitled to 2 weeks paid
vacation every year the employee works for the company. The conditions of the paid
vacation are:
A. For each full year, an employee will receive two weeks of paid vacation. No vacation
accrues for a portion of a year.
B. Each employee will receive the same pay for vacation time as the regular pay in the
year taken.
C. Unused vacation pay can be carried forward.
Cumulative
Vacation
Taken as of Weekly
Employee Starting Date 12/13/2011 Salary
A 12/1/2004 10 weeks P 5,000
B 3/1/2009 2 weeks 4,000
C 8/1/2010 None 3,000
D 12/1/2009 3 weeks 3,000
E 3/31/2011 None 2,500
1. JR Company should report liability for vacation pay on December 31, 2011 at:
PROBLEM 2: Woodstock Company has established a defined benefit pension plan for its
employees. Annual payments under the pension plan are equal to an employee’s highest
lifetime salary multiplied by 2% multiplied by number of years with the entity. As of the
beginning of 2011, an employee had worked for Woodstock Company for 10 years. The
current salary of the employee is P500,000. The employee is expected to retire in 25 years
and the salary increases are expected to average 3% per year during that period. The
employee is expected to live for 15 years after retiring and will receive the first annual
pension payment one year after retirement. The discount rate is 8%.
2. What is the amount of annual pension payment to be used in computing the
employee’s accumulated benefit obligation on January 1, 2011?
3. What is the accumulated benefit obligation on January 1, 2011?
4. What is the amount of annual pension payment to be used in computing the
employee’s projected benefit obligation on January 1, 2011?
5. What is the accumulated benefit obligation on January 1, 2011?
6. What are the current service costs for 2011, 2012 and 2013?
7. Prepare a schedule showing the pension liability on December 31 each year and the
interest cost for 2011, 2012 and 2013.
PROBLEM 3: The following information relates to the defined benefit pension plan of Shoot
Company as of December 31, 2010:
Projected benefit obligation (PBO) P 16,700,000
Fair value of plan assets 12,500,000
Unrecognized past service cost 1,000,000
Unrecognized actuarial loss, net 2,000,000
Pension data for the year 2011 follows:
Current service cost P 880,000
Amortization of past service cost 200,000
Contributions to the plan 1,100,000
Benefits paid to retirees 1,500,000
Actual return on plan assets 1,000,000
The average remaining service period of the covered employees is 5 years. Settlement
interest rate and expected rate of return on plan assets are 12% and 10%, respectively.
8. Compute for the amount to be recognized in 2011 profit or loss.
9. The amount to be recognized in the statement of financial position as of December 31,
2011 is:
10. The fair value of plan assets as of December 31, 2011 is:
11. The projected benefit obligation as of December 31, 2011 is:
12. The unrecognized actuarial loss, net as of December 31, 2011 is:

Prepared by: Mohammad Muariff S. Balang, CPA, Second Semester, AY 2012-2013 Page | 1
PROBLEM 4: You gathered the following information related to Hanep Company’s defined
benefit plan for the year ended December 31, 2011:
A. Current service cost of providing benefits for the year to December 31, 2011: P30
million.
B. Average remaining working life of employees: 10 years.
C. Benefits paid to retired employees in the year: P31 million.
D. Contributions paid to the fund: P21 million.
E. Present value of obligation to provide benefits: P2,200 million at January 1, 2011 and
P2,500 million at December 31, 2011.
F. Fair value of plan assets: P2,100 million at January 1, 2011 and P2,400 million at
December 31, 2011.
G. Net cumulative unrecognized gains at January 1, 2011: P252 million.
H. Past service cost: P115 million. All of these benefits have vested.
I. Discount rates and expected rates of return on plan assets:
1/1/11 1/1/12
Discount rate 5% 6%
Expected rate of return on plan assets 7% 8%
13. The amount to be recognized in the statement of financial position as of January 1,
2011 is:
14. The amount of actuarial gain to be recognized in 2011 profit or loss is:
15. The amount to be recognized in 2011 profit or loss is:
16. The unrecognized actuarial gain as of December 31, 2011 is:
17. The amount to be recognized in the statement of financial position as of December 31,
2011 is:

Prepared by: Mohammad Muariff S. Balang, CPA, Second Semester, AY 2012-2013 Page | 2
Operating Lease Finance Lease - Lessee
1 Entries 1 70000 1 437500 11 32,050 21 1,835,000 31 350,980
2 Entries 2 2317500 2 4006500 12 2,080,000 22 6,863,455 32 15,385
3 940,000 3 68,333 3 85,000 13 Entry 23 1,242,080 33 47,933
4 222,222 4 380,000 4 9,750 14 467,575 24 1,243,561 34 20,406
5 4,925,000 5 1,007,083 5 330,000 15 2,378,560 25 Entry 35 117,840
6 405,000 6 2,000,000 6 0 (25,000 payable) 16 1,734,992 26 275,000
7 225,000 7 1,120,000 7 650,000 17 1,555,483 27 12%
8 927,778 8 520,000 8 2,620,000 18 450,000 28 435,526
9 5,150,000 9 60,000 9 50,000 19 2,525,000 29 679,730
10 225,000 10 120,000 10 232,050 20 875,614 30 4,578,000

Direct Financing Lease Sales Type Lease and Sale and Leaseback
1 Entries 11 3,023,698 1 Entries 11 1,350,732 21 245,000
2 Entries 12 12% 2 Entries 12 546,728 22 745,000 loss
3 257,600 13 4,620,963 3 1,908,287 13 1,067,665 23 400,000 net gain
4 412,586 14 8 years 4 5,028,287 14 1,739,927 24 500,000
5 49,510 15 817,485 5 164,703 15 7,731,600 25 0
6 394,491 16 2,800,000 6 2,797,500 16 1,625,050 26 72,500
7 47,339 17 910,074 7 4,579,100 17 5,875,000 27 310,000
8 400,383 18 3,169,880 8 3,002,500 18 8,392,500 28 100,000 loss
9 309,340 19 3,388,415 9 19,243,900 19 485,000 29 1,600,000
10 354,025 20 629,517 10 4,555,000 20 2,135,000 loss

Third Comprehensive Test

1 94,125 11 50,000 21 360,000 expense 31 755,160
2 98,415 12 307,767 22 450,000 expense 32 Bonus
3 488,237 13 18 23 720,000 33 Bonus
4 498,237 14 68,300 24 296,000 34 Bonus
5 300,000 15 76,942 25 Entry 35 Bonus
6 434,366 16 73,259 26 82,465 36 42,000
7 871,054 17 23,400 27 7,200 37 30,000
8 12,434 18 195,000 28 20,250 38 400,000 net gain
9 55,238 19 242,643 29 85,600 39 500,000
10 51,512 20 210,000 income 30 380,160 40 0

Prepared by: Mohammad Muariff S. Balang, CPA, Second Semester, AY 2012-2013 Page | 3