FAR EASTERN UNIVERSITY – DILIMAN

FAR Review Ÿ Batch 2022 Ÿ January 25, 2022

FINANCIAL ACCOUNTING & REPORTING G. Macariola

FAR-2202: EMPLOYEE BENEFITS

PROBLEM SOLVING

On January 1, 2017, the memorandum records of Grumpy Company showed the following balances
related to its defined benefit plan:
Fair value of plan asset 5,500,000
Defined benefit obligation 4,500,000

The transactions affecting the defined benefit plan for 2017 are as follows:

Current service cost 750,000

Discount rate 10%
Actual return on plan assets 520,000
Contribution to the plan 500,000
Benefits paid to retirees 200,000

1. How much is the balance of prepaid or accrued pension as of Jan. 1, 2017?

a. 1.0M accrued b. 1.0M prepaid c. 4,500,000 prepaid d. 5,500,000 accrued

2. What is the fair value of the plan assets as of December 31, 2017?
a. 5,500,000 b. 6,350,000 c. 6,320,000 d. 5,800,000

3. What amount of the actual return on plan assets should be included in profit or
loss?
a. 0 b. 520,000 c. 30,000 d. 550,000

The following information pertains to Doc Corporation defined benefit plan for the year 2017:

Defined benefit obligation, January 1, 2017 P 2,200,000

Fair value of plan assets, January 1, 2017 1,400,000
Actual return on plan assets 90,000
Settlement price of additional DBO settled 200,000
Present value of additional DBO settled 250,000
Defined benefit obligation, December 31, 2017 2,070,000
Current service cost 800,000
Discount rate 10%
Benefits paid to retirees (at scheduled retirement) 700,000
Contribution made during the year 650,000
Past service cost 300,000

4. What amount of defined benefit cost should be reported in profit or loss?

a. 1,130,000 b. 450,000 c. 550,000 d. 680,000

5. What amount of net measurement gain/loss should be reported in other

comprehensive income?
a. 1,130,000 b. 450,000 c. 550,000 d. 680,000

6. What is the fair value of plan assets as of December 31, 2017?

a. 1,240,000 b. 1,490,000 c. 1,290,000 d. 1,400,000

7. How much is the balance of prepaid or accrued pension as of December 31, 2017?
a. 2,070,000 b. 1,240,000 c. 830,000 d. 770,000

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The following information is made available in relation to the defined benefit plan of Dopey Company
for the year 2017:
January 1 December 31
Fair value of the plan assets 5,200,000 6,000,000
Defined benefit obligation 4,000,000 4,200,000
Prepaid/Surplus 1,200,000 1,800,000
Asset ceiling 400,000 600,000
Effect of asset ceiling 800,000 1,200,000

Other relevant information for 2017 is as follows:

Current service cost 200,000

Contribution to the plan 700,000
Discount rate 10%
Benefits paid to retirees 300,000

8. What amount of defined benefit cost should be reported in profit or loss for 2017?
a. 340,000 b. 160,000 c. 500,000 d. 180,000

9. What is the total net remeasurement gain/loss to be reported as a component of

other comprehensive income?
a. 120,000 b. 100,000 c. 320,000 d. 340,000

10.How much is the overfunding/underfunding for the year 2017?

a. 200,000 over b. 200,000 under c. 600,000 over d. 600,000 under

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