Question

Pearsall Company's defined benefit pension plan had a PBO of $268,000 on January 1, 2021. During 2021, pension benefits paid were $47,000. The discount rate for the plan for this year was 10%. Service cost for 2021 was $86,000. Plan assets (fair value) increased during the year by $54,000. The amount of the PBO at December 31, 2021, was:

Answer 1

The amount of the PBO at December 31, 2021, was $333800

Explanation:

The amount of PBO at december 31st is calculated as follows:

PBO on jan 1, 2021 = $268000

add: Service cost = $86000

add: interest = $26800

less: pension benefits that have been paid = $47000

now, we have to solve the above calculation

we get, PBO at dev 31 = $333800

Note: interest is calculated by multiplying the PBO amount on Jan 1,2021 with the rate of interest given.

Thus, $268000 multiply 10% = $26800