Problem 5-1: Short-term employee benefits; Compensated Sick and Vacation Leaves

A.

B.

C.

Daily Wage
Accumulated Leaves
Current Liability 12/31/05

Daily Wage
Accumulated Leaves
Current Liability 12/31/06

Liability, 1/1/06
Used leaves (925*P275)
Liaility before accrual
Adjusted balance
Net adjustment to liability

Php
Php

Php
Php

Php
Php
Php

250.00
1,350
337,500.00

275.00
1,600
44,000.00

337,500.00
(254,375.00)
83,125.00
440,000.00
356,875.00

cation Leaves
Employees
A.

Weeks
55
25

4
2

30
25
30
10

4
4
3
1

TOTAL

B.

TOTAL

Days/week

Total
5
5

1,100
250
1,350

5
5
5
5

600
500
450
50
1,600

Problem 5-2
Net Profit
Multiply by: Profit share percentage
Total profit sharing payment if no employee leaves
Multiply by: Percentage of employees remaining (90/100)
Liability for profit sharing, 2012

Php
Php
Php

1,000,000
0.03
30,000
0.90
27,000

Problem 5-3 Short Term Employee Benefits; Bonus Computation

B = .10 (100,000 - T) + .30B
T = 30% (100,000 - B)

A.

B = .10 [100,000 - .30 (100,000 - B)] + .30B

B = .10 (100,000 - 30,000 + .30B) + .30B
B = 10,000 - 3,000 + .03B +.30B
B = .03B + .30B = 7,000
B = 10,447.76

T = .30 (100,000 - B)
T = .30 (100,000 - 10,447.76)
T = .30 (89552.24)
T = 26,865.67

TS = TR* B
TS = .30 * 10,447.76
TS = 3134

Net Income
Bonus
Tax
Net Income after bonus and tax

Php

Php

100,000.00
(10,447.76)
(26,865.67)
62,686.57

Problem 5-4
1 a) PBO, beg.
Current service cost
Interest cost (5Mx10%)
PBO, end
b) FVPA, beg.
Actual return (4Mx12%)
Contribution
FVPA, end
c) Current service cost
Interest cost
Expected return
Total benefit expense
2

Benefit Expense
Accrued Benefit Cost

FVPA, beg.
PBO, end
Accrued benefit cost, end
Accrued benefit cost, beg.
Credit adjustment
Accrued benefit cost, end

70,000

Php

Php
Php

Php
Php

Php

5,000,000
1,550,000
500,000
7,050,000
4,000,000
480,000
1,500,000
5,980,000
1,550,000
500,000
(480,000)
1,570,000

70,000

Php
Php
Php
Php

5,980,000
(7,050,000)
(1,070,000)
(1,000,000)
(70,000)
(1,070,000)

Problem 5-5: Post-Employment Benefit Plan, Retirement Expense and Current Service Cost; Reconstructio
1

PBO, end
Benefits paid
Interest Cost (13,800,000 * 11%)
PBO, beg.
Current Service Cost
FVPA, beg
Employer Contribution
Actual Return on Plan Assets
Benefits paid
FVPA, end
Current Service Cost
Interest Cost
Expected Return on Plan Assets
Amortization of Deferred Gain
Benefit Expense

Php

Php
Php

Php
Php

Php

14,187,000.00
1,170,000.00
(1,518,000.00)
(13,800,000.00)
39,000.00
15,105,000.00
1,275,000.00
1,485,000.00
(1,170,000.00)
16,695,000.00
39,000.00
1,518,000.00
(1,350,000.00)
(97,500.00)
109,500.00

t Service Cost; Reconstruction

Problem 5-6
1 PBO, end
PBO, beg.
Interest cost (840000x10%)
Benefits paid
Current service cost
2 Expected return on plan asset (770000x8%)
Actuarial loss
Actual return on plan asset

Php

Php
Php
Php

922,500.00
(840,000.00)
(84,000.00)
66,000.00
64,500.00
61,600.00
(50,500.00)
11,100.00

Problem 5-7: Post Employment Benefit Plan; Defined Benefit Plan - Reconstruction
1)

Projected Benefit Obligation, 12-31-10

Benefits Paid
Current Service Cost
Projected Benefit Obligation, 1-1-10
Interest Cost

2)

FVPA -PBO, beg

FVPA -PBO, end
Change in Prepaid/ABC
Contributions
Benefit Expense
Current Service Cost
Interest Cost
Benefit Expense
Expected Return on Plan Asset

construction
Php

Php

Php
Php
Php
Php

Php

1,175,200.00
77,000.00
(120,000.00)
(1,020,000.00)
112,200.00

Interest Cost
PBO, 1/1/10
Settlement Rate

112,000.00
1,020,000.00
0.11

130,000.00
172,100.00
(42,100.00)
110,000.00
152,100.00

Expected Return
FVPA, beg
Rate of ERPA

80,100.00
890,000.00
0.09

120,000.00
112,200.00
(152,100.00)
80,100.00

Problem 5-8

1 FV of plan assets, beginning

PBO, beg.
Unamortized actuarial gain
Unamortized Past Service Cost
Prepaid/(Accrued) Benefit Cost

Php

2 Net cumulative unrecognized gains

Corridor (10% * 4,560,000,000)

Php

Difference
Divided by remaining working life
Actuarial gain/(loss)

3 Current Service Cost

Interest Cost
Expected return on plan assets
Amortization of past service cost (223,000,000/10)
Amortization of actuarial gain [(4,830,000 4,560,000)/10]
Benefit Expense

Php

Php

Php

4,200,000,000.00
(4,560,000,000)
(483,000,000)
223,000,000
(620,000,000.00)
483,000,000.00
(456,000,000)
27,000,000
10
2,700,000.00

68,000,000.00
273,600,000
(336,000,000)
22,300,000

Php

(2,700,000)
25,200,000.00

Beginning balance of Unrecognized Actuarial

Gain
Amortization of actuarial gain
Present Benefit Obligation, beg.
Current Service Cost
Interest Cost
Benefits paid
Present Benefit Obligation, end.
Actuarial gain-deferred

Php
Php

4,560,000,000.00
68,000,000
273,600,000
(48,300,000)
(5,230,000,000)

483,000,000.00
(2,700,000)

(376,700,000)
507,800,000

Unrecognized Actuarial Gain, December 31

Php

611,400,000.00

FV of plan assets, end

Php

5,030,000,000.00

Php

(611,400,000)
200,700,000
(5,230,000,000)
(610,700,000.00)

Unrecognized Actuarial Gain, December 31

Unamortized past service cost
PBO, end
Prepaid/(Accrued) Benefit Cost

Problem 5-9 Audit Simulation: Basic Salaries Expense

Head Office
Employee 1
Employee 2
Employee 3
Employee 4
Employee 5
Employee 6
Employee 7
Employee 8
Employee 9
Employee 10
Employee 11
Employee 12
Employee 13
Employee 14
Officer 1
Officer 2
Officer 3
Officer 4
Salaries Expense per Audit
Salaries Expense per Client
Difference (Increase)

Employment Period
Start
End
1/1/2009
12/31/2009
1/1/2009
4/15/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009
1/1/2009
12/31/2009

Half Month Basic

Pay
Php
3,500.00
4,850.00
3,750.00
3,500.00
3,250.00
3,250.00
2,915.00
3,250.00
2,915.00
2,915.00
3,850.00
3,850.00
3,500.00
4,200.00
9,700.00
8,350.00
8,000.00
5,500.00

Salaries per Month

Php

7,000.00
9,700.00
7,500.00
7,000.00
6,500.00
6,500.00
5,830.00
6,500.00
5,830.00
5,830.00
7,700.00
7,700.00
7,000.00
8,400.00
19,400.00
16,700.00
16,000.00
11,000.00

Months
Employed
12
3.5
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12

Salaries Payable
Php

Php
Php

84,000.00
33,950.00
90,000.00
84,000.00
78,000.00
78,000.00
69,960.00
78,000.00
69,960.00
69,960.00
92,400.00
92,400.00
84,000.00
100,800.00
232,800.00
200,400.00
192,000.00
132,000.00
1,862,630.00
1,867,495.19
(4,865.19)

Problem 5-10
1 PBO, beg.
Interest cost
Current service cost
Actuarial (gain)/loss on obligation
PBO, end
2 FVPA, beg
Expected return
Actuarial gain/(loss) on plan assets
FVPA, end
3 Unrecognized Actuarial Loss, beg
Actuarial gain/(loss) recognized
Actuarial (gain)/loss on obligation
Actuarial gain/(loss) on plan assets
Unrecognized Actuarial Loss, end

Php

Php
Php

Php
Php

Php

2010
2,656,667.00 Php
252,915.00
117,951.00
100,516.00
3,128,049.00 Php

2009
2,102,611.00
567,936.00
19,418.00
(33,298.00)
2,656,667.00

551,015.00 Php
22,041.00
32,863.00
605,919.00 Php

515,527.00
20,621.00
14,867.00
551,015.00

(375,704.00) Php
6,472.78
(100,516.00)
32,863.00
(436,884.22) Php

(433,343.00)
12,393.44
33,298.00
14,867.00
(372,784.56)

4 Interest cost
Current service cost
Expected return
Actuarial gain/(loss) recognized
Retirement Expense

Php

5 FVPA, end
Unamortized actuarial loss
PBO, end
Net Liability

Php

Unamortized
Corridor
Difference
Divide by
Amortization

Php

Php
Php
Php
Php

2010
252,915.00 Php
117,951.00
(22,041.00)
6,472.78
355,297.78 Php

2009
567,936.00
19,418.00
(20,621.00)
12,393.44
579,126.44

605,919.00 Php
436,884.22
(3,128,049.00)
(2,085,245.78) Php

551,015.00
372,784.56
(2,656,667.00)
(1,732,867.44)

375,704.00 Php
265,666.70
110,037.30 Php
17.00
6,472.78 Php

433,343.00
210,261.10
223,081.90
18.00
12,393.44