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labwork [276]
4 years ago
14

Louie Company has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO repo

rt from the actuary. The following information was included in the report: ending PBO, $112,000; benefits paid to retirees, $10,000; interest cost, $7,500. The discount rate applied by the actuary was 10%. What was the service cost for the year
Business
1 answer:
Andreyy894 years ago
4 0

Answer: $39,500

Explanation:

Service Cost for the year = Ending PBO - Opening PBO - Interest cost + Benefits paid

<u>Opening PBO</u>

Opening PBO is the amount that the interest was charged on.

Discount rate of 10% came out to be $7,500.

The opening balance = 7,500/10%

= $75,000

Service Cost = 112,000 - 75,000 - 7,500 + 10,000

Service Cost for the year = $39,500

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