INTERMEDIATE ACCOUNTING II (AE 16)

LEARNING MATERIAL

UNIT NUMBER/ HEADING: POSTEMPLOYMENT BENEFIT –

DEFINED BENEFIT PLAN- ACCOUNTING PROCEDURES

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Problem 1:
Sada Company provided the following information pertaining to a pension
plan for the current year:

Actuarial value of PBO, beginning P7,200,000

Assumed discount rate 10%
Service cost P1,800,000
Pension benefits paid P1,500,000

No change in actuarial estimate occurred during the current year.

What is the projected benefit obligation at year-end?
a. P6,240,000 b. P7,500,000 c. P7,920,000 d. P8,220,000
**P7,200,000 + P720,000 + P1,800,000 – P1,500,000 = P8,220,000

Problem 2:
Daimon Company provided the following information with respect to the
defined benefit plan for the current year:

PBO – January 1 P3,000,000

PBO – December 31 P3,500,000
Contribution to the plan P 600,000
Benefits paid P 500,000
Discount rate 10%

What is the current service cost for the current year?

a. P700,000 b. P600,000 c. P500,000 d. P300,000

**P3,000,000 + P700,000 + (P3,000,000 x 10%) – P500,000 = P3,500,000 squeeze computation

Problem 3:
Rabiya Company received the following report from the independent actuary
in relation to a defined benefit pension plan at year-end:

Pension benefits paid P 135,000

PBO at year-end P2,160,000
Interest expense on PBO P 120,000

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Discount rate 8%

What is the current service cost for the current year?

a. P675,000 b. P810,000 c. P540,000 d. P255,000

**(P120,000/8%) + P675,000 + P120,000 – P135,000 = P2,160,000 squeeze computation

Problem 4:
Gail Company provided the following information pertaining to defined benefit
plan for the current year:

FVPA, beginning P3,500,000

FVPA, ending P5,250,000
Employer contributions P1,100,000
Benefits paid P 880,000

What was the actual return on plan assets?

**P3,500,000 + P1,500,000 + P1,100,000 – P850,000 = P5,250,000 squeeze computation

Problem 5:
Manaoag Company maintains a fund to cover a pension plan with the
following data for the current year:

January 1 FVPA P8,750,000

Market-related value of the pension
fund (5-year weighted average) P7,150,000

During year Pension benefits paid P 600,000

Contribution to the fund P 700,000
Actual return on plan assets P 950,000

What is the fair value of plan assets on December 31?

a. P8,200,000 b. P9,800,000 c. P7,250,000 d. P8,850,000
**P8,750,000 + P700,000 + P950,000 – P600,000 = P9,800,000

Problem 6:
Caticlan Company provided the following information:

FVPA – January 1 P3,500,000

FVPA – December 31 P3,900,000
Market-related value of plan assets – Jan 1 P2,800,000
Market-related value of plan assets – Dec 31 P2,900,000
Contributions to the plan P 280,000

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Benefits paid P 250,000

What is the actual return on plan assets for the current year?
a. P400,000 b. P370,000 c. P430,000 d. P100,000

**P3,500,000 + P370,000 + P280,000 – P250,000 = P3,900,000 squeeze computation

Problem 7:
Marion Company provided the following data for the current year:

January 1 FVPA P9,000,000

During year Pension benefits paid P 700,000
Contribution to the plan P1,000,000
Expected return on plan assets P1,200,000
Interest income on plan assets P 900,000
December 31 FVPA P9,900,000

What is the remeasurement gain or loss on plan assets for the current year?
a. P300,000 gain c. P600,000 gain
b. P300,000 loss d. P600,000 loss

**P1,200,000 – P900,000 = P300,000 gain