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What is the total liability for special termination benefits

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On September 1, 2016, Milan Company offered special termination benefits to employees who had reached the early retirement age. The termination benefits consisted of lump-sum and periodic future payments. Additionally, the employees accepting the offer received the usual early retirement pension benefits. The offer expired on November 30, 2016.

Information on December 31, 2016 is as follows:

  1. Lump-sum payments totaling P475,000 were made January 1, 2017.
  2. Periodic payments of P60,000 annually for three years will begin January 1, 2018. The present value on December 31, 2016 of these payments was P155,000.
  3. Reduction of accrued pension costs on December 31, 2016 for the terminating employees was P45,000.

Problem 1: On December 31, 2016, what is the total liability for special termination benefits?

Option 1: P655,000
Option 2: P475,000
Option 3: P585,000
Option 4: P630,000

Reference no: EM132740074

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