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ABC Co. pays salaries twice a month and does not pay salaries in advance.
Employees work five days a week and compensation are computed on these
working days. In December 20x1, ABC Co. paid the second monthly salaries on
December 26 which falls on a Friday. The next non-working holiday is on New Years
Day. ABC has 100 employees who earn P1,000 per day. ABCs cost accountant
identified that 70% of salaries accrued incurred pertain to the production of goods.
How much is the accrued salaries as of December 31, 20x1?
SICK LEAVE
An entity has 100 employees who are entitled to five (5) working days of paid sick
leave for each year Unused sick leave may be carried forward for one calendar year.
Sick leave is taken first out of the current years entitlement and then out of any
balance brought forward from the previous year (a LIFO basis).
At December 30, 20x1,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 20x1 is P1,000 and it is not expected to
change in 20x2.
How much is the accrued salaries for sick leave and record the corresponding entry
to record the liability and when the sick leaves are taken in 20x2.
BONUS COMPUTATION
ABC Co. grants its managerial employees bonus in the form of profit sharing.
Information n operations in 20x1 is shown below:
Profit before tax
P1,000,000
10%
30%
Compute for
1.
2.
3.
4.
Bonus
Bonus
Bonus
Bonus
P120,000
30,000
Interest Cost
10%
50,000
10,000
Required: Compute for the balance of present value of defined benefit obligation as
of year end.
P120,000
122,000
10%
50,000
10,000
years
Discount rae per year
10%
Requirement
1. How much is the ultimate cost of the defined benefit plan? (or how much is
the total amount of retirement benefits to be received by the employee?)
2. How much are the current service costs in 20x1, 20x2, 20x3, 20x4 and 20x5,
respectively?
3. How much are the present value of the defined benefit obligation at each
year-end in 20x1, 20x2, 20x3, 20x4, and 20x5 respectivley?
ASSIGNMENT
Information on ABC Co.s defined benefit plan is show below
Fair value of plan assets, Jan 1
1,000,000
120,000
30,000
1,200,000
300,000
50,000
Discount rate
10%
Requirements
a. Compute for the net defined benefit liability (asset) as of Jan 1
b. Compute for the net defined liability (asset) as of December 31.