Question

A company's defined benefit pension plan had a pension benefit obligation (PBO) of $265,000 on 1/1/2018. During 2018, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2018 was $80,000. Plan assets (fair value) increased during the year by $45,000. The amount of PBO at December 31, 2018 was what?

Answer 1

The pension benefit obligation will be $331500

Step-by-step explanation:

We have given PBO = $265000

Less pension benefits paid = $40000

Discount rate = 10% = 0.01

Service cost = $80000

Interest cost = $265000×0.01= $26500

We have to find the amount of PBO

So the pension benefit obligation PBO will be = $265000+$80000+$26500-$40000 = $331500

So the pension benefit obligation will be $331500