(Short-term compensated absences)

Case 1: (Accumulating vs. Non-accumulating) Tanduay Inc. compensates its employees for certain
absences. Employees can receive one day vacation plus one day sick leave for each month worked
during the year. Unused vacation days may be carried forward, but unused sick leave expires within the
year of employment. Employees are compensated according to their current pay rate. The following
data were taken from the records for the year 20x8.

Earned Carry
Starting Sick Leave Forward Vacation Days Current Pay
Employee Date Taken 20x8 1/1/2028 Taken 2028 per Day
A 1/6/2026 5 0 7 P7
0
B 6/2/2027 10 6 3 60
C 11/4/2028 5 0 0 48
E 7/28/2028 2 0 1 79

Required: Compute the amount that should be reported as a liability for compensated absences on
December 31, 2028.

Case 2: (Vacation leave – accumulating, vesting vs. Non-vesting)

ABC Co. grants its employees 12 days paid vacation leave each year. Per ABC’s policy, employees are
required to take vacation leave each year, but not necessarily for their entire vacation leave entitlement.
Vacation leaves not taken during a year can be carried over indefinitely.

ABC has 500 employees with an average salary of P1,000 per day. The average annual pay increase is
5%. During 20X1, total vacation leaves taken by employees were 5,400 days. Based on past experience,
90% of unused vacation leave for a year are taken in the immediately following year.

Required A: Assume that unused vacation leaves vest, how much should ABC accrue as liability
for unused vacation leave on December 31, 2022?

Required B: Assume that unused vacation leaves do not vest, how much should ABC accrue as
liability for unused vacation leave on December 31, 2022?
Case 3: (Sick Leave/Vacation Leave under LIFO Basis)

An entity has 100 employees, who are each entitled to five (5) working days of paid sick leave for each
year. Unused sick leave may be carried forward to one calendar year. Sick leave is taken first out of the
current year’s entitlement and then out of any balance brought forward from the previous year (a LIFO
basis).

At December 30, 2022, the average unused entitlement is two days per employee. The entity expects,
based on past experience which is expected to continue, that:

• 92 employees will take no more than five days of paid sick leave in 20X2 and
• That the remaining 8 employees will take an average of six and a half days each.
• The average salary per day, per employee in 2022 is P1,000 and it is not expected to change in
2023.

Required: Compute for the short-term employee benefits for compensated absences recognized
on December 31, 2022.

( Profit – sharing and bonus plans)

A profit-sharing plan requires an entity to pay a specified proportion of its profit for the year to employees
who serve throughout the year. If no employees leave during the year, the total profit-sharing payments
for the year will be 3% of profit. The entity estimates that staff turnover will reduce the payments to 2.5%
of profit.

Required: The entity recognizes a liability and an expense of .