2 An entity provides 30 days of accumulating annual leave to all of its employees. The annual leave will continue to rollover for a period of 3 years if not taken in the first year. However, leave rolled-over to subsequent periods is not paid out in the event of employment termination at the request of the employee. At the end of the entity’s annual reporting period (31 December 2020), the entity notes the following:2,000 employees have 16 days of 2020 annual leave on average per employee remainingBased on historical trend, 50% (8 days) of the outstanding leave is expected to be taken in the next twelve months and 25% (4 days) in each of the subsequent two years (4 days) in each of the subsequent two yearsEmployees’ average salary is P70,000, with 10% increases expected per annumTurnover is expected to be 20% per annumDiscount rate is 5%Average of 260 working days per annum The related accrued benefit obligation at December 31, 2020 isGroup of answer choicesP9,476,923P8,658,117P7,988,818P11,467,077

Accumulated benefit obligation is equal to the present value of the future amount that a pension…

Answered: An entity provides 30 days of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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2 An entity provides 30 days of accumulating annual leave to all of its employees. The annual leave will continue to rollover for a period of 3 years if not taken in the first year. However, leave rolled-over to subsequent periods is not paid out in the event of employment termination at the request of the employee.

At the end of the entity’s annual reporting period (31 December 2020), the entity notes the following:

2,000 employees have 16 days of 2020 annual leave on average per employee remaining
Based on historical trend, 50% (8 days) of the outstanding leave is expected to be taken in the next twelve months and 25% (4 days) in each of the subsequent two years (4 days) in each of the subsequent two years
Employees’ average salary is P70,000, with 10% increases expected per annum
Turnover is expected to be 20% per annum
Discount rate is 5%
Average of 260 working days per annum

The related accrued benefit obligation at December 31, 2020 is

Group of answer choices

P9,476,923

P8,658,117

P7,988,818

P11,467,077

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