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How the obligation builds up over the employee service

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Reference no: EM133158296

Question - A director of Ester Company shall receive a retirement benefit of 20% of final salary per annum for a contractual period of three years. The anticipated salary is P1,000,000 for 2019, P1,200,000 for 2020, and P1,500,000 for 2021. The discount rate is 10%. The present value of 1 at 10% is 0.909 for one period and 0.826 for two periods.

Required -

1. Using the projected unit credit method, show how the obligation builds up over the employee's service. Ignore actuarial assumptions other than the discount rate.

2. Prepare journal entries.

Reference no: EM133158296

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