Question

A company's defined benefit pension plan had a PBO of $271,000 on January 1, 2018. During 2018, pension benefits paid were $43,000. The discount rate for the plan for this year was 8%. Service cost for 2018 was $85,000. Plan assets (fair value) increased during the year by $53,000. The amount of the PBO at December 31, 2018, was:

Answer 1

$334,680

Step-by-step explanation:

The computation of amount of the PBO is shown below:-

Interest cost = Beginning balance of PBO × Discount rate in percentage

= $271,000 × 8%

= $21,680

Closing PBO = Beginning balance of PBO + Service cost + Interest cost - Benefit paid

= $271,000 + $85,000 + $21,680 - $43,000

= $377,680 - $43,000

= $334,680