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PRACTICAL ACCOUNTING 1 – REVIEW

EMPLOYEE BENEFITS

PROF. U.C. VALLADOLID

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

1. JP Company provided the following information for the current year:

Projected benefit obligation, January 1 5,600,000
Fair value of plan assets, January 1 5,000,000
Current service cost 1,110,000
Actual return on plan assets 450,000
Actuarial gain during the year 150,000
Employer contribution 425,000
Benefits paid to retirees 390,000
Settlement rate 10%
What is the total defined benefit cost?
a. 1,120,000
b. 1,100,000
c. 1,170,000

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d. 1,070,000

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2. JP Company provided the following information pertaining to the defined benefit plan for the current
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year:

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Current service cost 1,600,000
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Actual return on plan assets 350,000
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Interest income on plan assets 400,000

Past service cost during the year 50,000
Annual interest on pension liability 500,000
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What is the total defined benefit cost?

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a. 2,150,000
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b. 1,700,000
c. 1,800,000
d. 1,750,000
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ed d

3. Shawn Company provided the following information for the current year:
Current service cost 520,000
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Actual return on plan assets 810,000

Interest expense on PBO 590,000
Interest income on plan assets 350,000
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Loss on plan settlement 240,000

Past service cost during the year 360,000
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Contribution to the plan 1,500,000

Q1. What is the employee benefit expense for the current year?
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a. 1,710,000
b. 1,470,000
c. 1,350,000
d. 1,360,000

Q2. What is the remeasurement gain or loss?

a. 460,000 loss
b. 460,000 gain
c. 220,000 loss
d. 220,000 gain

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Q3. What is the total defined benefit cost?

a. 1,820,000
b. 900,000
c. 740,000
d. 960,000

Q4. What is the prepaid or accrued benefit cost for the year?
a. 600,000 accrued
b. 600,000 prepaid
c. 140,000 accrued
d. 140,000 prepaid
4. On January 1, 2016, Shawn Company reported the fair value of plan assets at P6,700,000 and
projected benefit obligation at P7,600,000. The entity revealed the following for the current year:
Current service cost 1,450,000
Past service cost 300,000
Discount rate 10%
Actual return on plan assets 500,000
Contribution to the plan 1,500,000
Benefits paid to retirees 800,000

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Q1. What is the employee benefit expense?

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a. 1,840,000
b. 1,540,000
c. 2,510,000
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d. 1,750,000
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Q2. What is the remeasurement gain or loss on plan assets?

a. 170,000 gain
b. 170,000 loss
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c. 670,000 gain
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d. 670,000 loss
vi re

Q3. What is the fair value of plan assets on December 31?

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a. 8,070,000
b. 7,400,000
ed d

c. 7,900,000
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d. 8,200,000

Q4. What is the projected benefit obligation on December 31?

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a. 8,250,000
b. 9,050,000
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c. 9,010,000
d. 9,310,000
5. On January 1, 2016, Steven Company reported fair value of plan assets at P6,500,000 and projected
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benefit obligation at P7,500,000. During the current year, the entity determined that the current
service cost was P1,200,000 and the discount rate is 10%. The actual return on plan assets was
P800,000 during the year. Other information during the year related to the defined benefit plan is as
follows:
Contribution to the plan 1,200,000
Benefits paid to retires 1,500,000
Decrease in projected benefit obligation due
to change in actuarial assumptions 200,000

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Q1. What is the employee benefit expense?

a. 1,300,000
b. 1,950,000
c. 1,200,000
d. 1,100,000

Q2. What is the total remeasurement gain?

a. 350,000
b. 150,000
c. 200,000
d. 800,000

Q3. What is the fair value of plan assets on December 31?

a. 7,000,000
b. 8,500,000
c. 8,350,000
d. 7,550,000

Q4. What is the projected benefit obligation on December 31?

a. 7,750,000

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b. 8,700,000

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c. 9,250,000

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d. 7,950,000 eH w
6. On January 1, 2016, Steven Company reported the fair value of plan assets at P6,000,000 and

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projected benefit obligation at P8,000,000. During the year, the entity made a lump sum payment to
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certain plan participants in exchange for their rights to receive specified postemployment benefits.
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The lump sum payment was P800,000 and the present value of the defined benefit obligation settled
was P1,000,000. In addition, the following data are gathered during the current year:
Current service cost 900,000
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Actual return on plan assets 800,000

aC s

Contribution to the plan 700,000

vi re

Discount rate 12%

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Q1. What is the employee benefit expense?

a. 1,140,000
ed d

b. 1,860,000
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c. 900,000
d. 940,000
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Q2. What is the fair value of plan assets on December 31?

a. 7,500,000
Th

b. 6,700,000
c. 6,000,000
d. 5,900,000
sh

Q3. What is the projected benefit obligation on December 31?

a. 8,900,000
b. 8,860,000
c. 9,680,000
d. 9,060,000

Q4. What is the accrued benefit cost on December 31?

a. 2,160,000
b. 2,000,000
c. 3,160,000
d. 2,240,000

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7. Ana Company provided the following information on January 1, 2016 prior to the adoption of PAS
19R:
Fair value of plan assets 4,750,000
Unamortized past service cost 1,250,000
Projected benefit obligation 5,500,000
Unrecognized actuarial gain 850,000
The transactions for the current year are as follows:
Current service cost 925,000
Discount rate 6%
Actual return on plan assets 485,000
Contribution to the plan 1,350,000
Benefits paid to retirees 925,000
Increase in projected benefit obligation due to
change in actuarial assumptions 150,000

Q1. What is the employee benefit expense?

a. 1,255,000
b. 1,540,000
c. 970,000
d.925,000

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Q2. What is the net remeasurement gain?

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a. 200,000 eH w
b. 150,000

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c. 350,000
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d. 50,000
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Q3. What is the prepaid/accrued benefit cost on December 31?

a. 480,000 prepaid
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b. 480,000 accrued
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c. 320,000 prepaid
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d. 320,000 accrued
8. Ana Company provided the following information during 2016:
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January 1 December 31
Fair value of plan assets 6,000,000 7,900,000
ed d

Projected benefit obligation 5,000,000 5,900,000

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Prepaid/accrued benefit cost- surplus 1,000,000 2,000,000

Asset ceiling 700,000 1,200,000
Effect of asset ceiling 300,000 800,000
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During the current year, the following data are gathered:

Current service cost 700,000
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Past service cost 200,000

Actual return on plan assets 900,000
Decrease in projected benefit obligation due
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change in actuarial assumptions 500,000

Discount rate 10%

Q1. What is the employee benefit expense?

a. 830,000
b. 900,000
c. 800,000
d. 870,000

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Q2. What is the net remeasurement gain?

a. 330,000
b. 800,000
c. 300,000
d. 500,000
9. On January 1, 2016, Kris Company had a projected benefit obligation of P10,000,000 and a pension
fund with a fair value of P9,200,000. The entity provided the following information during the
current year:
Current service cost 1,200,000
Actual return on pension fund 250,000
Benefits paid to retirees 1,100,000
Contribution to pension fund 1,050,000
Discount rate 9%
Expected return on pension fund 10%

Q1. What is the pension expense for the current year?

a. 1,272,000
b. 2,100,000
c. 1,850,000
d. 1,050,000

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Q2. What is the fair value of pension fund on December 31?
a. 9,400,000
b. 9,450,000
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c. 8,350,000
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d. 9,150,000
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Q3. What is the projected benefit obligation on December 31?

a. 11,000,000
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b. 12,100,000
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c. 11,200,000
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d. 10,100,000
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Q4. What is the remeasurement gain or loss on December 31?

a. 578,000 gain
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b. 578,000 loss
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c. 250,000 gain
d. 250,000 loss
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Q5. What is the pension asset or liability on December 31?

a. 1,600,000 liability
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b. 1,600,000 asset
c. 800,000 liability
d. 800,000 asset
sh

10. Kelly Company provided the following information related to a defined benefit plan for the year
ended December 3, 2016:
Current service cost 30,000
Benefits paid 31,000
Contribution to the fund 21,000

Fair value of plan assets:

January 1 2,100,000
December 31 2,400,000

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Projected benefit obligation

January 1 2,200,000
December 31 2,500,000

Past service cost the current year 115,000

On January 1, 2016, the discount rate and expected rate of return are 5% and 7% respectively. On
January 1, 2015, the discount rate and expected rate of return are 6% and 8% respectively.

Q1. What amount should be recognized as employee benefit expense for the current year?
a. 150,000
b. 145,000
c. 115,000
d. 140,000

Q2. What is the actual return on plan assets?

a. 310,000
b. 147,000
c. 163,000
d. 341,000

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Q3. What is the actuarial loss arising from the increase I projected benefit obligation?

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a. 191,000 eH w
b. 300,000

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c. 185,000
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d. 76,000
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Q4. What is the net measurement gain or loss on December 31, 2016?
a. 281,000 gain
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b. 281,000 loss
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c. 129,000 gain
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d. 129,000 loss

Q5. What amount should be reported as prepaid or accrued benefit cost on December 31, 2016
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a. 150,000 accrued
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b. 150,000 prepaid
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c. 100,000 accrued
d. 100,000 prepaid
11. Kelly Company provided the following information for 2016:
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January 1 December 31
Fair value of plan assets 2,600,000 3,000,000
Th

Projected benefit obligation 2,000,000 2,100,000

Prepaid/accrued benefit cost-surplus 600,000 900,000
Asset ceiling 200,000 300,000
sh

Effect of asset ceiling 400,000 600,000

Current service cost 100,000
Contribution to the plan 350,000
Benefits paid 150,000
Discount rate 10%

Q1. What is the actual return on plan assets for the current year?
a. 200,000
b. 350,000
c. 150,000
d. 260,000

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Q2. What is the actual gain due to decrease in PBO?

a. 50,000
b. 40,000
c. 30,000
d. 0

Q3. What is the employee benefit expense for 2016?

a. 200,000
b. 100,000
c. 80,000
d. 40,000

Q4. What is the net remeasurement loss in 2016?

a. 110,000
b. 220,000
c. 270,000
d. 170,000
12. Kimberly Company provided the following information pertaining to the pension plan for the current
year:
Projected benefit obligation on January 1 7,200,000

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Assumed discount rate 10%

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Service cost 1,800,000
Pension benefits paid
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If no change in actuarial estimate occurred in the current year, what is the projected obligation on
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December 31?
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a. 6,420,000
b. 7,500,000
c. 7,920,000
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d. 8,220,000
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13. Kimberly Company provided the following plan information for the current year:
January 1 Projected benefit obligation 3,500,000
Accumulated benefit obligation 2,800,000
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During the year Pension benefits paid to retired

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employees 250,000
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December 31 Projected benefit obligation 4,200,000

Accumulated benefit obligation 3,100,000
Discount or settlement rate 10%
There is no change in actuarial assumptions during the year. What is the current service cost for the
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current year?
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a. 600,000
b. 950,000
c. 250,000
d. 270,000
sh

14. Ivan Company provided the following information:

January1 December 31
Fair value of plan assets 3,500,000 3,900,000
Market related value of plan assets 2,800,000 2,900,000
Contribution to the plan 280,000
Benefits paid to retirees 250,000

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What is the actual return on plan assets for the current year?
a. 400,000
b. 370,000
c. 430,000
d. 100,000
15. Anna Company amended the pension plan at the beginning of the current year.
Before amendment After amendment
Accumulated benefit obligation 950,000 1,425,000
Projected benefit obligation 1,300,000 1,900,000

What is the total amount of past service cost as a result of the amendment?
a. 950,000
b. 600,000
c. 475,000
d. 125,000
16. On January 1, 2016, Ivane Company established a noncontributory defined benefit plan covering all
employees and contributed P1,000,000 to the plan . On December 31,2016, the entity determined
that the current service cost and interest expense on the benefit obligation totaled P620,000. The
discount rate was 10%. There was no remeasurement gain or loss during the year. What amount

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should be reported on December 31,2016 as prepaid pension cost?

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a. 280,000

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b. 380,000 eH w
c. 480,000

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d. 620,000
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17. On January 1, 2016, Ivan Company adopted a defined benefit plan. The current service cost of
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P750,000 was fully funded at the end of 2016. Past service cost was funded by a contribution of
P300,000 in 2016. Past service cost was P120,000 for 2016. What is the prepaid pension cost on
December 31, 2016?
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a. 180,000
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b. 300,000
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c. 420,000
d. 540,000
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18. Cleo Company had the following balances relating to the defined benefit plan on December 31,
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2016:
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Fair value of plan assets 37,000,000

Projected benefit obligation 33,000,000
Asset ceiling 2,500,000
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What is the prepaid benefit cost on December 31, 2016?

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a. 4,000,000
b. 1,500,000
c. 2,500,000
d. 0
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19. On December 31, 2016, Cleo Company provided the following information:
Fair value of plan assets 3,450,000
Accumulated benefit obligation 4,300,000
Projected benefit obligation 5,700,000

What is the accrued liability on December 31, 2016?

a. 5,700,000
b 2,250,000
c. 1,400,000
d. 850,000

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20. Cleo Company provided the following information pertaining to the defined benefit pension plan for
the current year:
Prepaid pension cost, January 1 20,000
Current service cost 190,000
Interest expense on PBO 380,000
Interest income and actual return on plan assets 400,000
Past service cost during the year 500,000
Employer contribution 400,000

What is the accrued pension cost at year-end?

a. 250,000
b. 290,000
c. 270,000
d. 400,000

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aC s
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y
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