Question

Mary Abbott is a long-time employee of Love Enterprises, a manufacturer and distributor of farm implements. Abbott plans to retire on her 65th birthday (January 1, 2019) five years from today. Her current salary is $48,000 per year, and her projected salary for her last year of employment is $60,000. Love Enterprises sponsors a defined benefit pension plan. It provides for an annual pension benefit equal to 60% of the employee’s annual salary at retirement. Payments commence on the employee’s 66th birthday or one year after the anniversary date of his or her retirement. The discount and earnings rate on plan assets is 8%. The average life expectancy for male and female employees is 76 and 80, respectively.
Required:

1. Compute the PBO related to Abbott’s pension benefits as of January 1, 2014.

2. Compute the ABO for the year ended December 31, 2014.

Answer 1

Answer:

Answer for the question:

Mary Abbott is a long-time employee of Love Enterprises, a manufacturer and distributor of farm implements. Abbott plans to retire on her 65th birthday (January 1, 2019) five years from today. Her current salary is $48,000 per year, and her projected salary for her last year of employment is $60,000. Love Enterprises sponsors a defined benefit pension plan. It provides for an annual pension benefit equal to 60% of the employee’s annual salary at retirement. Payments commence on the employee’s 66th birthday or one year after the anniversary date of his or her retirement. The discount and earnings rate on plan assets is 8%. The average life expectancy for male and female employees is 76 and 80, respectively.

Required:

1. Compute the PBO related to Abbott’s pension benefits as of January 1, 2014.

2. Compute the ABO for the year ended December 31, 2014.

Is given in the attachment.

Explanation:

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