Question

A​ company's defined benefit pension plan had a projected benefit obligation​ (PBO) of $ 390 comma 000 on January​ 1, Year 1. During Year​ 1, pension benefits paid were $ 80 comma 000. The settlement rate for the plan for Year 1 was 12​%. Service cost for the year was $ 92 comma 000. Plan assets​ (fair value) increased during the year by​ $50,000. What was the PBO at December​ 31, Year​ 1

Answer 1

Answer:

$448,800

Explanation:

The computation of the ending balance of PBO is shown below:

Beginning balance of PBO   $390,000

Add: Service cost     $92,000

Add:  Interest ($390,000 × 12%)  $46,800

Less: Pension Benefit paid                ($80,000)

Closing balance of  PBO                $448,800

We simply applied the above formula to find out the ending balance of PBO