Problem 17-18 (IAA) Generous Company has established a defined benefit plan indicating a plan formula for annual benefit equal to 2% the final year's salary. The annual benefit is payable at the multiplied by the number of years in service multiplied by end of each year. An employee was hired by the entity on January 1, 2000 and expected to retire on December 31, 2044. The employee's retirement is expected to span 21 years. The employee's final salary at retirement is expected to be P800,000 and the appropriate discount rate is 8%. On January 1, 2020, the plan formula was amended by increasing the percentage from 2% to 3%. The amendment was made retroactive to consider past service years. The present value of an ordinary annuity of 1 at 8% for 21 periods is 10.02 and the present value of 1 at 8% for 25 periods is 0.15. 1. What is the projected benefit obligation before amendment on January 1, 2020? 480,960 a. b. 320,000 c. 160,000 d. 400,000 2. What is the projected benefit obligation after amendment on January 1, 2020? a. 480,000 b. 721,440 c. 240,000 d. 320,640 3. What is the past service cost for 2020 as a result of the amendment? a. 160,000 b. 120,240 c. 240,480 d. 0

Problem 17-18 (IAA) Generous Company has established a defined benefit plan indicating a plan formula for annual benefit equal to 2% the final year's salary. The annual benefit is payable at the multiplied by the number of years in service multiplied by end of each year. An employee was hired by the entity on January 1, 2000 and expected to retire on December 31, 2044. The employee's retirement is expected to span 21 years. The employee's final salary at retirement is expected to be P800,000 and the appropriate discount rate is 8%. On January 1, 2020, the plan formula was amended by increasing the percentage from 2% to 3%. The amendment was made retroactive to consider past service years. The present value of an ordinary annuity of 1 at 8% for 21 periods is 10.02 and the present value of 1 at 8% for 25 periods is 0.15. 1. What is the projected benefit obligation before amendment on January 1, 2020? 480,960 a. b. 320,000 c. 160,000 d. 400,000 2. What is the projected benefit obligation after amendment on January 1, 2020? a. 480,000 b. 721,440 c. 240,000 d. 320,640 3. What is the past service cost for 2020 as a result of the amendment? a. 160,000 b. 120,240 c. 240,480 d. 0

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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EXHIBIT 13-1 Defined Benefit Plans Minimum Vesting Schedules* 5-Year Cliff 7-Year Graded Full Years of Service 1 0% 0% 2 0 0 3 0 20 4 0 40 5 100 60 6 N/A 80 7 N/A 100 CAM, Inc provides a defined benefit plan to its employees. Under the plan, employees earn a benefit equal to 1.2 percent for every year of service of their average salary for their three highest years of compensation. CAM implements a seven-year graded vesting schedule as part of the plan. If Hadley works for CAM for four years, earning annual salaries of $42,490, $46,220, $51,880, and $56,260, and then leaves to work for another employer at the beginning of her 5th year, what annual benefit would she be entitled to receive (her vested benefit)? swered 465,990 Answer 988 margin of error +/- 2
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