To encourage employees older than 60 years to extend their employment with the entity, Bennett Corporation promises its 60-year-old employees to lump sum benefit equal to 1 per cent of final salary for each year of service they remain employed by the entity after their 60th birthday provided they remain in the employ of Bennett Corporation until they are 65, at which time, in accordance with local laws, employees are required to retire. The benefit is payable to the employees on retirement. Razor’s 60th birthday is on 1 January 2020. His salary for the year ended 31 December 2020 is P400,000. At the 31st of December 2020 the entity made the following actuarial assumptions: • Razor’s salary should increase by 6 percent (compound) each year. • The appropriate discount rate is 10 percent per year. Requirements: 1. What is the expected final salary of Razor? 2. What is the projected benefit obligation on December 31, 2022? 3. What amount of total employee benefit expense will be recognized in 2021? 4. What amount of total employee benefit expense will be recognized in 2022?
To encourage employees older than 60 years to extend their employment with the entity, Bennett
Corporation promises its 60-year-old employees to lump sum benefit equal to 1 per cent of final salary
for each year of service they remain employed by the entity after their 60th birthday provided they
remain in the employ of Bennett Corporation until they are 65, at which time, in accordance with local
laws, employees are required to retire. The benefit is payable to the employees on retirement.
Razor’s 60th birthday is on 1 January 2020. His salary for the year ended 31 December 2020 is
P400,000. At the 31st of December 2020 the entity made the following actuarial assumptions:
• Razor’s salary should increase by 6 percent (compound) each year.
• The appropriate discount rate is 10 percent per year.
Requirements:
1. What is the expected final salary of Razor?
2. What is the projected benefit obligation on December 31, 2022?
3. What amount of total employee benefit expense will be recognized in 2021?
4. What amount of total employee benefit expense will be recognized in 2022?
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