EMPLOYEE BENEFITS Effect of asset ceiling 300,000 800,000

DINA ENG Company reported a prepaid benefit cost of During the year, the entity recognized current service cost of
P1,500,000 on January 1, 2016. The entity provided the P1,000,000, actual return on plan assets of P400,000, and
following information related to a defined plan during the current contribution to the plan of P2,100,000. The discount rate is 10%.
year:
(6) What is the employee benefit expense for the current year?
Current service cost 3,000,000 (7) What is the net remeasurement loss for the current year?
Actual return on plan assets 1,200,000 (8) What is the defined benefit cost?
Interest cost 800,000 (9) What amount of prepaid benefit cost should be reported on
Settlement price of benefit 500,000 December 31?
obligation paid in advance
Present value of benefit 600,000 ACCOUNTING FOR INCOME TAX
obligation paid in advance
Interest income 1,000,000 CARL DE RETA Co. reported net income for the current year
2014 at P10,000,000 before taxes. Included in the determination
Actuarial gain on PBO 400,000
of the said net income were:
Past service cost 500,000
Benefits paid to retirees 2,500,000
Temporary differences:
Contribution to the plan 4,000,000 Accrued warranty expenses 250,000
Projected benefit obligation – 8,000,000 Rental payments made in advance 400,000
Jan. 1 Advance collections from customers 500,000
Fair value of plan assets – 10,000,000 Provision for probable losses 900,000
Jan. 1
Asset ceiling – January 1 1,500,000 Permanent differences:
Asset ceiling – December 31 2,000,000 Non-taxable income 500,000
Discount rate 10% Non-deductible expenses 100,000

(1) What is the 2016 benefit expense? *The income tax rate is 40% and is not expected to change in
(2) What is the fair value of the plan assets at December 31? the future.
(3) What is the projected benefit obligation at December 31?
(4) What is the net remeasurement gain or loss in OCI? REQUIRED:

DINO GUAN Company provided the following pension plan
information for the current year:
January 1 Projected benefit obligation 3,500,000
Accumulated benefit obligation 2,800,000
During the year Pension benefits paid to
retired employees 250,000
December 31 Projected benefit obligation 4,200,000
Accumulated benefit obligation 3,100,000
(1) How much is the current tax expense?
(2) How much is the total tax expense?
(3) What is the total deferred tax asset to be presented in the
2014 statement of financial position?
(4) What is the total deferred tax liability to be presented in the
2014 statement of financial position?
(5) Assuming that the expected income tax rate for the following
year is 35%, what is the total tax expense?

PICPA LEVEL 1 REVIEWER

Discount or settlement rate 10% LIAM POE Company reported the following carrying amount of
assets and liabilities at year-end:
(5) What is the current service cost?
Property 10,000,000
PENNY RITO Company provided the following information Plant and equipment 5,000,000
during the current year: Inventory 4,000,000
Trade receivables 3,000,000
January 1 December Trade payables 6,000,000
31 Cash 2,000,000
Fair value of plan assets 6,000,000 8,500,000
Projected benefit obligation 5,000,000 6,500,000 Additionally, a P1,000,000 impairment loss to trade receivables
Prepaid/accrued benefit cost 1,000,000 2,000,000 has been made. This charge will not be allowed in the current
– surplus year for tax purposes. The income tax rate is 30%. The entity
Asset ceiling 700,000 1,200,000 has made an inventory obsolescence provision of P2,000,000
which is not allowable for tax purposes. However, for tax
purposes, the amount of plant and equipment and property was
P4,000,000 and P7,000,000 respectively.

REQUIRED:

(6) What is the deferred tax liability at year-end?

(7) What is the deferred tax asset at year-end?
VINA GO-ONG Company reported in the first year of
operations pretax financial income of P6,000,000. The current
year tax rate is 30% and the enacted rate for future years is
25%. The following differences existed:

Tax return Accounting record

Uncollectible accounts expense 200,000 300,000
Depreciation expense 800,000 500,000
Tax exempt interest revenue -- 150,000

REQUIRED:

(8) What is the current tax expense?

(9) What is the total tax expense?

NELLIE CHUN Company provided the following information at

year-end:

Carrying amount Tax base

Accounts receivable 1,500,000 1,750,000
Motor vehicle 1,650,000 1,250,000
Provision for warranty 120,000 0
Deposit received in advance 150,000 0

An allowance for doubtful accounts of P250,000 has been

raised against accounts receivable for accounting purposes but
such doubtful accounts are deductible only when written off as
uncollectible. The enacted income tax rate is 30%.

In a nutshell, 25% and 15% are the depreciation rates for

taxation and accounting respectively. In addition, the provision
for warranty costs is deductible when paid and deposits
received in advance are taxable when received.

PICPA LEVEL 1 REVIEWER

REQUIRED:

(10) What amount should be reported as deferred tax liability?

(11) What amount should be reported as deferred tax asset?

GOD BLESS!

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