Question

louie company has a defined benefit pension plan. on december 31 (the end of the fiscal year), the company received the pbo report from the actuary. the following information was included in the report: ending pbo, $117,000; benefits paid to retirees, $14,500; interest cost, $7,000. the discount rate applied by the actuary was 10%. what was the service cost for the year

Answer 1

$54,500 was the service cost for the year

Solution:

Beginning PBO ($7,000/10%)                  $70,000

Service cost                                               54,500*

Interest cost                                                7,000

Retiree benefits paid                                (14,500)

Ending PBO                                             $117,000

*$117,000+ $14,500–$7,000 -$70,000= $54,500