THE GO COMPANY

The record of Go Company for its defined benefit plan shows the following balances:

Plan assets, January 1, 2X16 P5,000,000

Defined benefit obligation, January 1, 2X16 5,800,000
2X16 information:
Current service cost 800,000
Discount rate 10%
Contributions made 1,850,000
Benefits paid 440,000
Past service cost as a result of a plan amendment 2,800,000
Plan assets, at fair value, December 31, 2X16 7,710,000
Defined benefit obligation, remeasured at December 31, 2X16 9,600,000

Required:
Using defined benefit plan worksheet, compute for the following (3 items x 5 points):
a) Retirement benefit expense to be reported in profit or loss section;
b) Remeasurement of defined benefit liability (net actuarial gain) in other comprehensive
income; and
c) Defined benefit liability in statement of financial position.
 DEFINED BENEFIT COST BENEFIT LIABILTY
Profit or Loss Other Defined Plan Assets
(Annual Pension Comprehensive Benefit
Expense) Income Liability

Beginning balances P5,800,000 P5,000,000

Current service cost P800,000 800,000
Interest cost:
a. Interest on benefit
obligation (5,800,000 580,000 580,000
x 10%)
b. Expected return on
plan assets (5,000,000 (500,000) (500,000)
x 10%)

Past service cost 2,800,000 2,800,000

Contributions 1,850,000
Benefits paid (440,000) (440,000)
Subtotal 3,680,000 9,540,000 6,910,000
Remeasurements:

a. Actuarial loss 60,000 60,000

b. Actuarial gain (800,000) 800,000

Ending Balances a. 3,680,000 b. (740,000) 9,600,000 7,710,000

Defined Benefit Liability Ending

Beginning balance (5,800,000 – 5,000,000) 800,000
Underfunding (3,680,000 + 860,000 – 1,850,000) 1,090,000
Ending balance 1,890,000

or

Defined benefit obligation 9,600,000

Less: Plan Assets 7,710,000
c. 1,890,000