CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS
BATCH 94 OCTOBER 2023 CPALE
OTHER EMPLOYEE BENEFIT
1. An entity had 50 employees who work 8 hours a day and are paid hourly. On January 1, 2023, the entity
began a program of granting the employees 15 days of paid vacation each year. Vacation days earned in
2023 may first be taken on January 1, 2024.
Hourly Vacation days earned Vacation days earned
Year wage by each employee by each employee
2023 150 15 0
2024 200 15 13
2025 250 15 15
The entity had chosen to accrue the liability for compensated absences at the current wage rate when the
compensated time is earned.
1. What amount should be reported as vacation pay expense for 2023?
a. 900,000
b. 800,000
c. 700,000
d. 0
2. What amount should be reported as accrued liability on December 31, 2025?
a. 1,700,000
b. 1,660,000
c. 1,360,000
d. 1,020,000
3. What amount should be reported as accrued liability on December 31, 2025 if the policy is to accrue
liability at the current wage rate at the end of the current year?
a. 1,700,000
b. 1,500,000
c. 1,360,000
d. 3,000,000
2. An entity has an employee benefit plan for compensated absences that gives employees 10 paid vacation
days and 10 paid sick days. Both vacation and sick days can be carried over indefinitely. Employees can
elect to receive payment in lieu of vacation days. However, no payment is given for sick days not taken.
At year-end, the unadjusted balance of liability for compensated absences was P210,000. The entity
estimated that there were 150 vacation days and 75 sick days available at year-end. The employees earn
an average of P1,000 per day. At year-end, what amount of liability for compensated absences is required
to be reported?
a. 360,000
b. 225,000
c. 210,000
d. 150,000
3. An entity granted all employees two weeks of paid vacation for each full year of employment. Unused
vacation time can be accumulated and carried forward to succeeding years and will be paid at the salaries
in effect when vacations are taken or when employment is terminated. The entity granted a 10% salary
increase to all employees on October 1, 2023.
Liability for accumulated vacations on January 1, 2023 350,000
Pre-2023 accrued vacations taken from January 1, 2023 to September 30, 2023 200,000
Vacations earned for work in 2023 adjusted to current rate 300,000
What amount should be reported as vacation pay expense for 2023?
a. 450,000
b. 335,000
c. 315,000
d. 300,000

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4. An entity is committed to close a factory in 10 months and shall terminate the employment of all the
remaining employees of the factory. Under the termination plan, an employee leaving before closure of
factory shall receive on termination date a cash payment of P20,000. However, an employee that renders
service until closure of the factory shall receive P60,000. There are 120 employees at the factory. The
entity expects 100 employees to leave before closure and 20 employees to render service until closure.
1. What amount should be recognized as termination benefit?
a. 2,400,000
b. 6,400,000
c. 2,000,000
d. 4,000,000
2. What amount should be recognized as short-term benefit?
a. 3,200,000
b. 1,200,000
c. 400,000
d. 800,000

5. On September 1, 2023, an entity offered special termination benefits to employees who had reached the
early retirement age. The termination benefits consisted of lump sum and periodic future payments.
• Lump sum payments totaling P475,000 were made January 1, 2024.
• Periodic payments of P60,000 annually for three years will begin January 1, 2025. The present value
on December 31, 2023 of these payments was P155,000.
• Reduction of accrued pension cost on December 31, 2023 was P45,000.
1. What amount should be reported as total liability for termination benefits on December 31, 2023?
a. 475,000
b. 585,000
c. 630,000
d. 655,000
2. What amount should be reported as termination benefit expense for 2023?
a. 630,000
b. 585,000
c. 475,000
d. 155,000

End

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