Question

The following information pertains to Pernell Company's pension plan. Beginning PBO: $500,000; current service cost $50,000; discount rate: 6%; contributions by Pernell: $40,000; benefits paid to employees: $25,000; loss on PBO: $5,000. The ending balance of the PBO will be:

Answer 1

Answer:

= $560,000

Explanation:

Given that:

• -Beginning PBO: 500,000
• -Current Service Cost: 50,000
• -Discount Rate: 6%  => interest cost = 500,000*6% = 30,000
• -Contributions by Pernell: 40,000
• -Benefits paid to employees 25,000
• -Loss on PBO: 5,000

As we know that service cost; gains and losses; payments to retired employees; prior service cost; interest cost; payments to employees are factors that change the balance of the PBO

So the ending balance of the PBO will be:

Beginning PBO + Current Service Cost + Interest cost Loss on PBO -Benefits paid to employees

$500,000 + $50,000+ $30,000+$5,000-$25,000

= $560,000