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Fair Value of Plan Assets

Less: Defined Benefit Obligation

xx
xx

Prepaid/(Accrued) Benefit Cost

xx

Current service cost


Past service cost
Gains/(Losses) on settlement
Net Interest
Interest on DBO
Interest on FVPA

xx
xx
xx
xx
(xx)

Employee Benefits Expense

XX

Actual retun on FVPA


Interest on FVPA

xx
xx

Remeasurement gain or loss on FVPA


Actuarial gains or losses on DBO

xx
xx

Net Remeasurement Gain or Loss

xx

Employee Benefits Expense


Net Remeasurement Gain or Loss

xx
xx

Total Defined Benefit Cost

xx

PROBLEM 1 LESMIS COMPANY


SETTLEMENT PRICE
Beginning Accrued Benefit Cost
Fair Value of Plan Assets
Defined Benefit Obligation
Accrued Benefit Cost
DefinedBenefit Obligation
Beginning balance, Jan 1, 2015
Current service cost
Interest cost (6,500,000 @ 7%)
Benefits paid
Present value of DBO settled
Actuarial gain due to derease in PBO

Fair Value of Plan Assets


Beginning balance
Contributions
Interest income (6,000,000 @ 7%)
Remeasurement gain on plan assets
Settlement price
Benefits paid
December 31, 2015
Actual Return
Dividends and interest earned on plan assets
Cost of managing the plan assets

Note:
Interest income
Remeasurement gain on plan assets
Actual return on plan assets
Retirement Expense
Current service cost
Interest cost (6,500,000 @ 7%)
Interest income (6,000,000 @ 7%)
Loss on settlement of plan

Remeasurement (gains)/losses
Actuarial gain due to derease in PBO
Remeasurement gain on plan assets
Net Remeasurement gain
Accrued Benefit Cost
Beginning balance
Retirement expense
Remeasurement gains
Contributions

6,000,000
6,500,000
(500,000)

6,500,000
1,550,000
455,000
(990,000)
(550,000)
(350,000)
6,615,000

6,000,000
1,140,000
420,000
355,000
(600,000)
(990,000)
6,325,000

880,000
(105,000)
775,000

420,000
355,000
775,000

1,550,000
455,000
(420,000)
50,000
1,635,000

(350,000)
(355,000)
(705,000)

500,000
1,635,000
(705,000)
(1,140,000)

290,000

Ending Accrued Benefit Cost


Fair Value of Plan Assets
Defined Benefit Obligation
Accrued Benefit Cost
Employee benefit expense
Remeasurement gain
Fair value of plan assets
Defined benefit obligation
Accrued benefit cost

6,325,000
6,615,000
(290,000)
1,635,000
(705,000)
6,325,000
6,615,000
(290,000)

PROBLEM 2 Cebu Company


ASSET CEILING
Beginning Accrued Benefit Cost
Fair Value of Plan Assets
Defined Benefit Obligation
Prepaid Benefit Cost
Asset Ceiling
Effect of asset ceiling

6,000,000
5,000,000
1,000,000
700,000
300,000

DefinedBenefit Obligation
Beginning balance
Current service cost
Interest cost (5,000,000 @ 10%)
Past sevice cost
Actuarial gain due to derease in PBO
December 31, 2014

5,000,000
700,000
500,000
200,000
(500,000)
5,900,000

Fair Value of Plan Assets


Beginning balance
Contributions
Interest income (6,000,000 @ 10%)
Remeasurement gain on plan assets
December 31, 2014

6,000,000
1,000,000
600,000
300,000
7,900,000

Note:
Interest income
Remeasurement gain on plan assets
Actual return on plan assets

600,000
300,000
900,000

Retirement Expense
Current service cost
Past sevice cost
Interest cost (5,000,000 @ 10%)
Interest income (6,000,000 @ 10%)
Interest cost on effect of asset ceiling
(300,000 @10%)

Remeasurement (gains)/losses
Actuarial gain due to derease in PBO
Remeasurement gain on plan assets
Effect of asset ceiling
Net Remeasurement gain
Effect of asset ceiling
Ending balance
Beginning balance
Increase in asset ceiling
Less: Interest cost on effect of asset ceiling

700,000
200,000
500,000
(600,000)
30,000
830,000

(500,000)
(300,000)
470,000
(330,000)

800,000
300,000
500,000
(30,000)
470,000

Prepaid Benefit Cost


Beginning balance
Retirement expense
Remeasurement gains
Contributions

Recon
Ending Prepaid Benefit Cost
Fair Value of Plan Assets
Defined Benefit Obligation
Prepaid Benefit Cost
Asset Ceiling
Effect of asset ceiling

Entry
Retirement expense
Remeasurement gains
Prepaid benefit cost
Prepaid benefit cost
Cash

(700,000)
830,000
(330,000)
(1,000,000)
(1,200,000)

7,900,000
5,900,000
2,000,000
1,200,000
800,000

830,000

1,000,000

PROBLEM 3 PIP COMPANY


Beginning Accrued Benefit Cost
Fair Value of Plan Assets
Defined Benefit Obligation
Accrued Benefit Cost
Add: Unamortized past service cost
Less: Unrecognized actuarial gain

Defined Benefit Obligation


Beginning balance
Current service cost
Interest cost (7,850,000 @ 7%)
Benefits paid
Actuarial loss due to increase in PBO
December 31, 2014
Fair Value of Plan Assets
Beginning balance
Contributions
Interest income (5,250,000 @ 7%)
Remeasurement gain on plan assets
Benefits paid
December 31, 2014
Note:
Interest income
Remeasurement gain on plan assets
Actual return on plan assets
Retirement Expense
Current service cost
Interest cost (7,850,000 @ 7%)
Interest income (5,250,000 @ 7%)

Remeasurement (gains)/losses
Actuarial loss due to increase in PBO
Remeasurement gain on plan assets
Net Remeasurement loss
Accrued Benefit Cost
Beginning balance
Transition to PAS 19R
Retirement expense
Remeasurement losses
Contributions

Recon
Ending Accrued Benefit Cost
Fair Value of Plan Assets

Projected Benefit Obligation


Accrued Benefit Cost
Entry
Prior year adjustment/ Retained earnings
Accrued benefit cost
Retirement expense
Remeasurement loss
Accrued benefit cost
Accrued benefit cost
Cash

330,000
500,000

###

5,250,000
7,850,000
(2,600,000)
1,750,000
(1,050,000)
(1,900,000)

7,850,000
1,300,000
549,500
(880,000)
750,000
9,569,500

5,250,000
1,500,000
367,500
127,500
(880,000)
6,365,000

367,500
127,500
495,000

1,300,000
549,500
(367,500)
1,482,000

750,000
(127,500)
622,500

1,900,000
700,000
1,482,000
622,500
(1,500,000)
3,204,500

6,365,000

9,569,500
(3,204,500)

700,000
700,000
1,482,000
622,500
2,104,500
1,500,000
1,500,000

Fair Value of Plan Assets


Defined Benefit Obligation
Prepaid Benefit Cost
Asset Ceiling
Effect of asset ceiling

Current service cost


Increase (Decrease) in the DBO
Interest cost
Past service cost

7,500,000
6,000,000
1,500,000
1,200,000
300,000

2013
1,250,000
219,000
540,000

2014
1,343,750
(62,500)
1,100,000

Bitter Company's Retirement Fund


Statement of Financial Position

Assets
Cash and cash equivalents
Equity securities

Liabilities
Accounts payable
Net Worth

2014

2013

2,000,000
7,150,000
9,150,000

1,250,000
7,500,000
8,750,000

15,000

25,000

9,135,000
9,150,000

8,725,000
8,750,000

2014
127,500
827,500
955,000

2013
109,750
554,250
664,000

87,500

75,000

867,500

589,000

Bitter Company's Retirement Fund


Statement of Income

Net interest
Dividends

Expense
Net Revenue

Bitter Company's Retirement Fund


Statement of Net Worth

Beginning balance
Net revenue
Additional contributions
Retirement payments

Beginning Accrued Benefit Cost

2014
8,725,000
867,500
1,060,000
(1,517,500)
9,135,000
-

2013
7,500,000
589,000
2,020,000
(1,384,000)
8,725,000
-

2014

2013

Fair Value of Plan Assets


Defined Benefit Obligation
Prepaid Benefit Cost
Asset Ceiling
Effect of asset ceiling

8,725,000
6,625,000
2,100,000
1,500,000
600,000

7,500,000
6,000,000
1,500,000
1,200,000
300,000

Defined Benefit Obligation


Beginning balance
Current service cost
Interest cost
Past sevice cost
Actuarial gain due to derease in PBO
Present value of DBO settle
Benefits paid
December 31, 2014

6,625,000
1,343,750
596,250
1,100,000
(62,500)
(400,000)
(1,517,500)
7,685,000

6,000,000
1,250,000
540,000

Fair Value of Plan Assets


Beginning balance
Contributions
Interest income
Remeasurement gain on plan assets
Settlement price
Benefits paid
December 31, 2014

8,725,000
1,060,000
785,250
82,250
(350,000)
(1,517,500)
8,785,000

(1,384,000)
8,725,000

Note:
Actual return on plan assets
Interest income
Remeasurement gain on plan assets

867,500
(785,250)
82,250

589,000
(675,000)
(86,000)

1,343,750
1,100,000
(50,000)
596,250
(785,250)
54,000
2,258,750

1,250,000

(62,500)
(82,250)
(554,000)
(698,750)

219,000
86,000
273,000
578,000

1,000,000
1,500,000
(500,000)
(54,000)
(554,000)

1,500,000
1,200,000
300,000
(27,000)
273,000

(1,500,000)
2,258,750

(1,200,000)
1,142,000

Retirement Expense
Current service cost
Past sevice cost
Gain on settlement
Interest cost
Interest income
Interest cost on effect of asset ceiling

Remeasurement (gains)/losses
Actuarial gain due to derease in PBO
Remeasurement gain on plan assets
Effect of asset ceiling
Net Remeasurement gain
Effect of asset ceiling
Ending balance
Beginning balance
Increase in asset ceiling
Less: Interest cost on effect of asset ceiling

Prepaid Benefit Cost


Beginning balance
Retirement expense

219,000
(1,384,000)
6,625,000

7,500,000
2,020,000
675,000
(86,000)

540,000
(675,000)
27,000
1,142,000

Remeasurement gains
Contributions

Recon
Ending Prepaid Benefit Cost
Fair Value of Plan Assets
Defined Benefit Obligation
Prepaid Benefit Cost
Asset Ceiling
Effect of asset ceiling

(698,750)
(1,060,000)
(1,000,000)
-

578,000
(2,020,000)
(1,500,000)
-

8,785,000
7,685,000
1,100,000
1,000,000
100,000

8,725,000
6,625,000
2,100,000
1,500,000
600,000

Description

Country of origin

Equipment 1
Equipment 2
Equipment 3
Equipment 4

USA
Japan
France
India

Price
250,000
2,000,000
360,000
1,250,000

December 31, 2014 March 1, 2015


P46/dollar
P0.66/yen
P49/euro
P0.72/rupee

December 31, 2014


March 1, 2015

Market price per kiloTime value of option


P150
49,000
P145
18,000

January 1
Fair value of plan assets
Projected benefit obligation
Accrued benefit cost

Current service cost


Contribution to the plan
Benefit paid
Discount rate

P44/dollar
P0.78/yen
P47/euro
P0.76/rupee

December 31

3,250,000
3,760,000
(510,000)

375,000
550,000
225,500
7%

3,675,000
4,126,500
(451,500)

0.09

(600,000)

ue of option

7,500,000
6,000,000
1,500,000
1,200,000
300,000
Currency

Conversion rate

dollars
yen
euro
rupee

P42/dollar
P0.42/yen
P51/euro
P0.75/rupee

The following data are available to Snow Whitey Company on January 1, 2014:
Fair Value of Plan Assets

6,000,000

Projected Benefit Obligation

6,500,000

Accrued Benefit Cost

(500,000)

During the current year, the following transactions are gathered:


Current service cost
Past service cost
Actual return of plan assets
Contribution to the plan
Benefits paid
Actuarial gain due to decrease in PBO
Discount rate
Rate of return on plan assets

1,500,000
300,000
400,000
1,000,000
900,000
350,000
7%
5%

DefinedBenefit Obligation
Beginning balance
Current service cost
Past service cost
Interest cost (6,500,000 @ 7%)
Benefits paid
Actuarial gain due to derease in PBO

6,500,000
1,500,000
300,000
455,000
(900,000)
(350,000)

December 31, 2014

7,505,000

Fair Value of Plan Assets


Beginning balance
Contributions
Interest income (6,000,000 @ 7%)
Remeasurement gain on plan assets
Benefits paid

6,000,000
1,000,000
420,000
(20,000)
(900,000)

December 31, 2014

6,500,000

Note:
Interest income
Remeasurement gain on plan assets

420,000
(20,000)

Actual return on plan assets

400,000

(1,005,000)

Retirement Expense
Current service cost
Past service cost
Interest cost (6,500,000 @ 7%)
Interest income (6,000,000 @ 7%)

1,500,000
300,000
455,000
(420,000)
1,835,000

Remeasurement (gains)/losses
Actuarial gain due to derease in PBO

(350,000)

Remeasurement gain on plan assets

20,000

Net Remeasurement gain


Accrued Benefit Cost
Beginning balance
Retirement expense
Remeasurement gains
Contributions

(330,000)

500,000
1,835,000
(330,000)
(1,000,000)
1,005,000