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    Solution:: PV of Defined Benefit Obligation 120,000 Current Service Cost (Squeeze)

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    Queen Valle
    The document provides information about Equanimity Composure Co.'s defined benefit plan. It shows that the present value of the defined benefit obligation was ₱480,000 on January 1st and ₱488,000 on December 31st. The interest cost was 10% and benefits paid to retirees was ₱200,000. The increase in the present value of the defined benefit obligation due to actuarial assumptions was ₱40,000. The current service cost is ₱120,000.

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    Solution:: PV of Defined Benefit Obligation 120,000 Current Service Cost (Squeeze)

    Uploaded by

    Queen Valle
    223 views1 page
    The document provides information about Equanimity Composure Co.'s defined benefit plan. It shows that the present value of the defined benefit obligation was ₱480,000 on January 1st and ₱488,000 on December 31st. The interest cost was 10% and benefits paid to retirees was ₱200,000. The increase in the present value of the defined benefit obligation due to actuarial assumptions was ₱40,000. The current service cost is ₱120,000.

    Original Description:

    problem

    Original Title

    EQUANIMITY COMPOSURE Co.’s

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    The document provides information about Equanimity Composure Co.'s defined benefit plan. It shows that the present value of the defined benefit obligation was ₱480,000 on January 1st and ₱488,000 on December 31st. The interest cost was 10% and benefits paid to retirees was ₱200,000. The increase in the present value of the defined benefit obligation due to actuarial assumptions was ₱40,000. The current service cost is ₱120,000.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    223 views1 page

    Solution:: PV of Defined Benefit Obligation 120,000 Current Service Cost (Squeeze)

    Uploaded by

    Queen Valle
    The document provides information about Equanimity Composure Co.'s defined benefit plan. It shows that the present value of the defined benefit obligation was ₱480,000 on January 1st and ₱488,000 on December 31st. The interest cost was 10% and benefits paid to retirees was ₱200,000. The increase in the present value of the defined benefit obligation due to actuarial assumptions was ₱40,000. The current service cost is ₱120,000.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    1. Information on EQUANIMITY COMPOSURE Co.

    ’s defined benefit plan is shown below:


     PV of defined benefit obligation, Jan. 1 ₱480,000
     PV of defined benefit obligation, Dec. 31 488,000
     Interest cost 10%
     Benefits paid to retirees 200,000
     Increase in present value of defined benefit obligation during the year due
    to changes in actuarial assumptions 40,000

    How much is the current service cost? (2)


    Solution:
    PV of defined benefit obligation
    480,000 Jan. 1
    Benefits paid 200,000 120,000 Current service cost (squeeze)
    48,000 Interest cost (480,000 x 10%)
    40,000 Actuarial loss - increase in PV of PBO
    Dec. 31 488,000

    2. ARTIFACT MAN MADE OBJECT Co. provides an incentive compensation plan under which
    its president receives a bonus equal to 10% of ARTIFACT’s profit before tax 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?

    Solution:
    Squeeze upwards
    Profit before bonus and before tax 4,000,000
    Bonus before tax but after bonus
    (3,636,366 x 10%) (363,636)
    Profit before tax but after bonus
    (2,545,456 ÷ 70%) 3,636,366
    Income tax (2,545,456 ÷ 70%) x 30% (1,090,909)
    Profit after tax and after bonus 2,545,456 Start

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