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Chapter 5
Employee Benefits Part 1
1. It refers to a plan where plan assets, if any, are retained and managed by the
employer.
a. Funded plan c. Unfunded plan
b. Non-contributory plan d. Delicate plan

2. These are pool of assets contributed by various unrelated employers to be used to

pay retirement benefits to participants without regard to the identity of the
contributing employers.
a. Multi-employer plans c. Pooling of assets plan
b. State plans d. Secret plan

3. Multi-employer plans are treated as

a. Defined contribution plan c. Hybrid plan

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b. Defined benefit plan d. a or b

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4. These are established by legislation and are operated by a government agency

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which is not subject to control or influence by the reporting entity.
a. State plans b. SSS c. GSIS d. Puro plan

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5. State plans are
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a. accounted for as defined contribution plan
b. accounted for as defined benefit plan
c. accounted for in the same way as multi-employer plans
d. accounted for only by the Commission on Audit
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6. The accounting for defined contribution plan

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a. is straightforward – actuarial computations are not required.

b. is complex – actuarial computations are required
c. is simple – not accounted for
d. is done only by CPAs
ed d

7. Under a defined contribution plan, the retirement benefits expense is

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a. equal to an actuarially determined amount

b. equal to the agreed periodic contribution to the fund
c. equal to the contribution made during the period
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d. zero, if no employee retired during the period

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8. Employee benefits are all forms of consideration given by an entity in exchange for
service rendered by employees. Which of the following employee benefits is not
within the scope of PAS 19?
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a. Short-term d. Termination
b. Post-employment e. Share-based payments
c. Other long-term

9. Which of the following employee benefits is not within the scope of PAS 19?
a. Semi-monthly salaries of employees
b. Employer’s share in SSS contributions

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c. One sack rice allowance

d. Bonus in the form the entity’s shares

10. Accumulating compensated absences are those that

a. can be carried over to the next period if not fully used during the year of
entitlement.
b. expire if not fully used during the year of entitlement.
c. can be carried over to the next period if not fully used during the year of
entitlement and are paid in cash when the employee leaves the company
d. are recognized only when actually taken by employees

"…Have I not commanded you? Be strong and courageous. Do not be frightened, and do
not be dismayed, for the Lord your God is with you wherever you go."
(Joshua 1:9)

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ANSWERS
1. C 6. A
2. A 7. B
3. D 8. E
4. A 9. D
5. C 10. A

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1. The last payday for a firm was December 27 on which it paid ₱40,000 to its
employees, the amount earned by employees through the pay period ending
December 16. For the period December 17 through December 31, the employees
earned ₱12,000.The adjusting entry required at December 31 would include:
a. cr. crash ₱12,000
b. dr. wages payable ₱12,000
c. dr. wages expense ₱12,000
d. dr. wages expense ₱40,000

2. Gavin Co. grants all employees two weeks of paid vacation for each full year of
employment. Unused vacation time can be accumulated and carried forward to
succeeding years and will be paid at the salaries in effect when vacations are taken
or when employment is terminated. There was no employee turnover in 20X6.
Additional information relating to the year ended December 31, 20X6, is as follows:

Liability for accumulated vacations at 12/31/X5 ₱35,000

Pre-20X6 accrued vacations taken from 1/1/X6 to 9/30/X6
(the authorized period for vacations) 20,000

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Vacations earned for work in 20X6 (adjusted to current rates) 30,000

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Gavin granted a 10% salary increase to all employees on October 1, 20X6, its annual

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salary increase date. For the year ended December 31, 20X6, Gavin should report
vacation pay expense of

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a. 45,000 b. 33,500
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c. 31,500 d. 30,000
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3. ANOMALOUS IRREGULAR Co. grants its employees twelve days paid vacation
leave each year. Per ANOMALOUS’s policy, employees are required to take vacation
leave each year, but not necessarily for their entire vacation leave entitlement.
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Vacation leaves not taken during a year can be carried over indefinitely.
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ADHERE has 500 employees with an average salary of ₱4,000 per day. The average
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annual pay increase is 5%. During 20x1, total vacation leaves taken by employees were
5,400 days. Based on past experience, 90% of unused vacation leave for a year are
taken in the immediately following year.
ed d

If unused vacation leaves vest, how much should ANOMALOUS accrue as liability for
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unused vacation leave on December 31, 20x1?

a. 2,520,000 b. 25,200,000 c. 2,268,000 d. 0
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Use the following information for the next four questions:

ADHERE TO STICK Co. grants its managerial employees bonus in the form of profit
sharing. Information on operations in 20x1 is shown below:
Profit before tax ₱4,000,000
Bonus rate or percentage 10%
Income tax rate 30%

4. How much is the bonus “before bonus and before tax?”

a. 363,636 b. 280,000 c. 400,000 d. 288,660

5. How much is the bonus “after bonus and before tax?”

a. 400,000 b. 363,636 c. 261,684 d. 245,798

6. How much is the bonus “before bonus and after tax?”

a. 363,636 b. 261,684 c. 245,798 d. 288,660

7. How much is the bonus “after bonus and after tax?”

a. 363,636 b. 261,682 c. 245,798 d. 288,660

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8. ARTIFACT MAN MADE OBJECT Co. provides an incentive compensation plan under

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which its president receives a bonus equal to 10% of ARTIFACT’s profit before tax

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but after deduction of the bonus. ARTIFACT’s profit after tax and after bonus for
the year is ₱2,545,456. Income tax rate is 30%. How much is the bonus?

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a. 245,798
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b. 261,684 c. 363,636 d. 288,660
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Use the following information for the next two questions:
AMNESTY PARDON Co. has a post-employment benefits plan that is considered as
defined contribution plan. According to the plan, AMNESTY agrees to contribute
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₱800,000 annually to a retirement fund for the benefit of its employees.

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On December 31, 20x1, because of poor results of operations and insufficient working
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capital, AMNESTY was only able to contribute ₱320,000 to the fund. On December 31,
20x2, because of a profitable year, AMNESTY decided to contribute ₱1,800,000 to the
retirement fund. On January 12, 20x3, an employee retired and was eligible to a
₱60,000 retirement benefits based on the operating efficiency and investment earnings
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of the fund.
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9. How much is the retirement benefits expense recognized in 20x2?

a. 800,000 b. 320,000 c. 1,800,000 d. 60,000
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10. How much is the retirement benefits expense recognized in 20x3?

a. 800,000 b. 320,000 c. 1,800,000 d. 60,000
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“A wise son heeds his father’s instruction, but a mocker does not respond to
rebukes.” - (Proverbs 13:1)
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- END -

SOLUTIONS
1. C

2. C
Solution:
Liability for accumulated vacations at 12/31/X5 35,000

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Pre-20X6 accrued vacations taken from 1/1/X6 to 9/30/X6 (20,000)

Liability to be carried over to the next period 15,000
Multiply by: Increase in salary level in Oct. 20x6 10%
Additional liability due to the increase in salary level 1,500
Vacations earned in 20X6 (adjusted to current rates) 30,000
Vacation pay expense in 20x6 31,500

3. A
Solution:
Total vacation leaves entitlement of employees in 20x1
6,000
(500 employees x 12 days each)
Vacation leaves taken in 20x1 (5,400)
Unused vacation leave carried over indefinitely 600
Multiply by: Expected pay rate in 20x2 (₱4,000 x 105%*) 4,200
Liability for unused vacation leaves 2,520,000
*100% + Average annual pay increase is 5%.

4. C

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Solution:

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B = P x Br

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B = 4,000,000 x 10%

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B = 400,000

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5. B
Solution: rs e
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P
B = P -
1 + Br
4,000,0
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B = 4,000,000 -
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1+
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10%
3,636,3
B = 4,000,000 -
64
B = 363,636
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6. D
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Solution:
1 - Tr
B = P x 1/Br -
Tr
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1 - 30%
4,000,00
B = x
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1/10% -
0
30%
4,000,00 70%
B = x
0 10 - 30%
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4,000,00 70%
B = x
0 9.7
B = 288,660

7. B
Solution:
1 – Tr
B = P X 1/Br - Tr +
1
70%
4,000,00
B = x 10 - 30% +
0
1
4,000,00 70%
B = x
0 10.7
B = 261,682

8. C

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Solution:

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Squeeze upwards

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Profit before bonus and before tax 4,000,000

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Bonus before tax but after bonus
(3,636,366 x 10%) (363,636)

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Profit before tax but after bonus
(2,545,456 ÷ 70%)
rs e 3,636,366
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Income tax (2,545,456 ÷ 70%) x 30% (1,090,909)
Profit after tax and after bonus 2,545,456 Start

9. A
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10. A
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