On September 1, 2020, Howe Company offered special termination benefits to employees who had reached the early retirement age specified in the entity's pension plan. The termination benefits consisted of lump sum and periodic future payments. Additionally, the employees accepting the entity offer receive the usual early retirement pension benefits. The offer expired on November 30, 2020. Actual or reasonably estimated amounts on December 31, 2020 relating to the employees accepting the offer are as follows: Lump sum payments made on January 1, 2021 475,000 Present value of periodic payments of P60,000 annually for 3 years which will begin January 1, 2022 Reduction of accrued pension cost on December 31,2020 for terminating employees 155,000
On September 1, 2020, Howe Company offered special termination benefits to employees who had reached the early retirement age specified in the entity's pension plan. The termination benefits consisted of lump sum and periodic
future payments.
Additionally, the employees accepting the entity offer receive the usual early retirement pension benefits. The offer expired on November 30, 2020.
Actual or reasonably estimated amounts on December 31, 2020 relating to the employees accepting the offer are as follows:
Lump sum payments made on January 1, 2021
475,000
Present value of periodic payments of P60,000 annually for 3 years which will begin January 1, 2022
Reduction of accrued pension cost on December 31,2020 for terminating employees
155,000
45,000
2. What amount should be recognized in profit or loss as a result of the termination benefits in 2020?
a. 630,000 b. 475,000
C. 585,000 d. 45,000
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