Question

Belton electronics has a defined benefit pension plan for their 120 employees. They decided to amend the pension plan, resulting in an increase of $1,450,000 to the projected benefit obligation. Belton believes that 10% of the employees will leave the company by the end of the first year, 25% in the second year, 40% in the third year, and 25% in the fourth year. How many total service-years does Belton need to account for in their amortization calculations if they use the years-of-service method?

A) 215 service-years

B) 240 service-years

C) 260 service-years

D) 280 service-years

Answer 1

Belton electronics needs to account for a total of 91 service-years in their amortization calculations using the years-of-service method.

Step-by-step explanation:

To calculate the total service-years Belton needs to account for in their amortization calculations using the years-of-service method, we need to consider the percentage of employees leaving the company each year. According to the given information, 10% of the employees will leave in the first year, 25% in the second year, 40% in the third year, and 25% in the fourth year.

We can calculate the number of service-years for each year as follows:

The total service-years Belton needs to account for is the sum of the service-years for each year: 12 + 27 + 32 + 20 = 91 service-years. Therefore, the correct answer is 91 service-years.