Reference no: EM132774485

HOWARD CORP. sponsors a defined-benefit pension plan for its employees. On January 1, 2013, the following balances related to this plan prior to adoption of PAS 19R.

Debit

Plan assets (fair value)        P4,500,000

Credit

Projected benefit obligation    P6,000,000

Debit

Past service cost     750,000

Credit

Unrecognized actuarial gain  650,000

As a result of the operation of the plan during 2013, the actuary provided the following additional data at December 31, 2013.

Service cost for 2013                          P750,000
Actual return on plan assets in 2013         450,000
Amortization of past service cost               200,000
Contributions in 2013                             1,150,000
Benefits paid to retirees in 2013                700,000
Discount rate                                            7%
Expected return rate                                    8%
Increase in projected benefit obligation due to changes in actuarial assumptions     100,000

Effective January 1, 2013, Howard has applied the provisions of PAS 19R in relation to its defined-benefit pension plan.

Problem 1. What amount of "net re-measurement" should Howard recognize through other comprehensive income?

A. P100,000 loss B. P135,000 gain C. P35,000 gain D. P35,000 loss

Problem 2. What is the net amount of adjustment to the January 1, 2013 balance of Retained earnings when the transitional effect of adopting PAS 19R is recognized?

A. P100,000 credit B. P100,000 debit C. P35,000 credit D. P35,000 debit