Sol. Man. Chapter 5 Employee Benefits Part 1 2021

Chapter 5
Employee Benefits (Part 1)
PROBLEM 1: TRUE OR FALSE

1. TRUE
2. TRUE
3. TRUE
4. FALSE – Both employee and employer will contribute – so is
for PhilHealth and Pag-IBIG.
5. TRUE
PROBLEM 2: MULTIPLE CHOICE – THEORY

1. D
2. D
3. C
4. C
5. D
6. B
7. A
8. B
9. A
10. A
1
PROBLEM 3: EXERCISES
1. Solution:
Employe Starting VL earned to VL Not
e date date VL Taken taken
S.
1/6/2000
Perkins 12 7 5
M.
6/2/2001
Jordan 18* 3 15
P. Ford 11/4/2002 2 0 2
J. Worthy 7/28/2002 5 1 4
* 12 during the year + 6 carry forward = 18
Vacation Liability for

Days
Employee Not Taken Rate per Day Compensated Absences
S. Perkins 5 ₱70 ₱ 350
M. Jordan 15 60 900
P. Ford 2 48 96
J. Worthy 4 9 316
₱1,662
2. Solutions:
Requirement (a):
Bonus before bonus and before tax
B = P x Br
B = 1,800,000 x 12% = 216,000
Requirement (b):
Bonus after bonus and before tax
P
B = P -
1 + Br
B = 1,800,000 – [1,800,000 ÷ (1 + 12%)]
B = 192,857
Requirement (c):
Bonus before bonus and after tax
2
1 – Tr
B = P x
1/Br – Tr
B = 1,800,000 x {(1 - 30%) ÷ [(1÷12%) - 30%]}
B = 156,846
Requirement (d):
Bonus after bonus and after tax
1 - Tr
B = P x
1/Br - Tr + 1
B = 1,800,000 x {(1 + 30%) ÷ [(1÷12%) - 30% + 1]}

B = 139,483
3. Solution:
1 - Tr
B = P x
1/Br - Tr + 1
44,000 = P x {(1 – 30%) ÷ [(1 ÷ 14%) – 30% + 1]}
44,000 = P x [(0.70) ÷ (7.14 – 0.30 + 1)]
44,000 = P x (0.70 ÷ 7.843)
44,000 = P x .089
P = 44,000 ÷ .089
P = 494,382
Note: The learner’s answer may NOT be exactly equal to the

amount above because of ROUNDING-OFF.
4. Solution:
Plan A: (8% Bonus based on profit after bonus but before taxes)
Bonus after bonus and before tax

P
B = P -
1 + Br
3
B = 100,000 – [100,000 ÷ (1 + 8%)]
B = 7,407
Plan B: (12% Bonus based on profit after bonus and taxes)

1 - Tr
B = P x
1/Br - Tr + 1
B = 100,000 x {(1 + 30%) ÷ [(1÷12%) - 30% + 1]}

B = 7,749
Answer: The executives would prefer Plan B
5. Solution:
20x1
Retirement benefits expense 2,000,000
Accrued retirement benefits 2,000,000
20x2
Accrued retirement benefits 2,000,000
Prepaid retirement benefits 700,000
Cash 4,700,000
20x3
Cash 1,200,000
Accrued retirement benefits 100,000
4
PROBLEM 4: MULTIPLE CHOICE – COMPUTATIONAL
1. C
Salary at regular rate (40 hrs. x 125) 5,000
Salary at special rate [20 x (125 x 150%)] 3,750
Gross pay 8,750
(525
SSS )
(131
PhilHealth )
(25
Pag-IBIG )
Net pay before withholding tax 8,069
(1,210
Withholding tax )
Net pay after withholding tax 6,858
2. B Ryan: (800 x 2) = 1,600. None is accrued for Todd because his

vacation rights neither vest nor accumulate.
3. D
Vacation days available at year-end 150
Multiply by: Average salary per day 100
Adjusted liability for compensated absences 15,000
No liability is recognized for the sick days. These are expensed

when actually taken.
4. D
1 – Tr
B = P x
1/Br - Tr + 1
B = 400,000 x {(1 + 30%) ÷ [(1÷10%) - 30% + 1]}
B = 26,168
5. A – the agreed annual contribution to the fund.
5
6
PROBLEM 5: FOR CLASSROOM DISCUSSION
1. Solutions:
Requirement (a):
Basic salaries 460,000
Cost of living allowances (COLA) 20,000
SSS contribution (employer's share) 24,173
PhilHealth contribution (employer's share) 6,000
Pag-IBIG (employer's share) 2,000
Total salaries expense 512,173
Requirement (b):
Basic salaries 460,000
Cost of living allowances (COLA) 20,000
(11,626
SSS contribution (employee's share)
)
(6,000
PhilHealth contribution (employee's share)
)
(2,000
Pag-IBIG (employee's share)
)
(9,112
Withholding taxes on salaries
)
“ Take-home” salaries of employees 451,262
Requirement (c):
Debit Credit
512,17
Salaries expense
3
SSS contribution payable (Ee’s sh. + Er’s
35,799
sh.)
PhilHealth contribution payable (Ee’s sh. + Er’s sh.) 12,000
Pag-IBIG contribution payable (Ee’s sh. + Er’s sh.) 4,000
Withholding taxes payable 9,112
Cash (Salaries payable) 451,262
2. Solution:
Year-end Salaries expense 13,390
Accrued salaries payable 13,390*
7
*Total sick leaves available in current year (20 ee's x 2
40
each)
Sick leaves taken (14)
Excess carried over to future periods 26
Multiply by: Future salary (500 x 103%) 515
Accrued liability as of year-end 13,390
The vacation leaves are not accrued because they are non-
accumulating and non-vesting. These are recognized when they
are taken.
3. Solutions:
Requirement (a): Bonus before bonus and before tax
B = P x Br
B = 200,000 x 2% = 4,000
Requirement (b): Bonus after bonus and before tax

P
B = P -
1 + Br
B = 200,000 – [200,000 ÷ (1 + 2%)]
B = 3,922
Requirement (c): Bonus before bonus and after tax

1 – Tr
B = P x
1/Br – Tr
B = 200,000 x {(1 - 30%) ÷ [(1÷2%) - 30%]}
B = 200,000 x (0.7 ÷ 49.7) = 2,817
Requirement (d): Bonus after bonus and after tax

1 - Tr
B = P x
1/Br - Tr + 1
B = 200,000 x {(1 + 30%) ÷ [(1÷2%) - 30% + 1]}

B = 200,000 x (0.7 ÷ 50.7) = 2,761
4. Solution:
8
20x1
Cash 1,200,000
20x2
Cash 700,000
20x3
Cash 1,050,000

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Chapter 5

Employee Benefits (Part 1)

PROBLEM 1: TRUE OR FALSE

PROBLEM 2: MULTIPLE CHOICE – THEORY

* 12 during the year + 6 carry forward = 18

Vacation Liability for

B = 1,800,000 x {(1 + 30%) ÷ [(1÷12%) - 30% + 1]}

Bonus after bonus and after tax

Note: The learner’s answer may NOT be exactly equal to the

Bonus after bonus and before tax

Plan B: (12% Bonus based on profit after bonus and taxes)

Bonus after bonus and after tax

B = 100,000 x {(1 + 30%) ÷ [(1÷12%) - 30% + 1]}

Answer: The executives would prefer Plan B

2. B Ryan: (800 x 2) = 1,600. None is accrued for Todd because his

No liability is recognized for the sick days. These are expensed

5. A – the agreed annual contribution to the fund.

Requirement (b): Bonus after bonus and before tax

Requirement (c): Bonus before bonus and after tax

Requirement (d): Bonus after bonus and after tax

B = 200,000 x {(1 + 30%) ÷ [(1÷2%) - 30% + 1]}

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