Question

Pearsall Company has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $113,000; benefits paid to retirees, $14,500; interest cost, $7,500. The discount rate applied by the actuary was 10%. What was the service cost for the year

Answer 1

Answer:

$45,000

Explanation:

Calculation to determine the service cost for the year

PBO, $113,000

Add benefits paid to retirees, $14,500

Less interest cost ($7,500)

Less Beginning PBO ($75,000)

($7,500/0.1)

Service cost $45,000

($113,000+$14,500-$7,500-$75,000)

Therefore the service cost for the year will be $45,000