BA 114.

2, AY 2016-2017
Exercises on Employee Benefits Pensions and Long-Term Benefits

Problem 1
Reese Co. had the following selected balances at December 31, 2014:

Projected benefit obligation P4,700,000

Fair value of plan assets 4,340,000
Unvested past service cost 120,000

Calculate the pension liability to be reported on the balance sheet.

Problem 2
On January 1, 2014, Stine Co. had the following balances:
Projected benefit obligation P3,700,000
Fair value of plan assets 3,700,000

Other data related to the pension plan for 2014:

Service costs 140,000
Unvested past service cost -0-
Contributions to the plan 224,000
Benefits paid 200,000
Actual return on plan assets 222,000
Discount rate 9%
Expected rate of return 6%

1) Determine the projected benefit obligation at December 31, 2014.

2) Determine the fair value of plan assets at December 31, 2014.
3) Calculate pension expense for 2014.
4) Prepare the journal entry in 2014 for this transaction.

Problem 3
Drennen Company has available the following information about its defined benefit
pension plan for the year ending December 31, 2014:
Service cost for 2014 P 36,000
Accumulated benefit obligation 984,000
Plan assets at fair value, beg balance 900,000
Unvested past service cost 432,000
Vested past service cost 726,000
Actual return on plan asset 144,000
Projected benefit obligation, beg balance 1,248,000
Actuarial gain 114,000
Discount rate 10%
Contribution 500,000
 1) Prepare a schedule showing the movement of the pension liability in 2014.
2) Prepare the necessary journal entry.

Problem 4
NLF Company operates a defined benefit post-employment plan. At 31 December 2012,
the present value of the defined benefit obligation was P40 million. The fair value of the
plan assets was P10 million, and the past service cost was P6 million, of which P4 million
remains unvested.
What is the defined benefit liability to be recognized by NLF at 31 December 2012?

Problem 5
The following information relates to the defined benefit pension plan for the
MasayangBubuyog Company for the year ending December 31, 2012.

Projected benefit obligation, January 1 P 5,520,000

Current service cost 154,800
Fair value of plan assets, January 1 6,042,000
Fair value of plan assets, December 31 6,678,000
Unvested past service cost 38,400
Employer contributions 510,000
Benefits paid to retirees 468,000
Settlement rate 10%
How much is the pension expense to be recognized in profit or loss for the year ended
31 December 2012?

Problem 6
An entity discontinues one of its businesses and employees of the discontinued business
will earn no further benefits. This is a curtailment without a settlement. Using current
actuarial assumptions (including current market interest rates and other current market
prices) immediately before the curtailment, the entity has a defined benefit obligation
with a net present value of CU1,000 and plan assets with a fair value of CU820. The
curtailment reduces the net present value of the obligation by CU100 to CU900.
1) What is the net liability recognized in the statement of financial position after
the curtailment?
2) Provide the journal entry to account for the curtailment.

Problem 7
An entitys employees are each entitled to five working days of paid sick leave for each
year of service. Unused sick leave may be carried forward for two calendar years. Sick
leave is taken first out of any balance brought forward from the previous years and then
out of the current years entitlement (a FIFO basis).
On average the entity expects that sick leave will be taken approximately halfway
through the year.
At 31 December 20X1 the appropriate discount rates (see paragraph 28.17) are 5 per
cent for a six-month period, 14 per cent for an 18-month period and 18 per cent for a
24-month period.
At 31 December 20X1 the entitys sick leave records were as follows:

At 31 December 20X1, what is the entitys liability for sick leave?