Question

Pearsall Company's defined benefit pension plan had a PBO of $268,000 on January 1, 2021. During 2021, pension benefits paid were $43,000. The discount rate for the plan for this year was 11%. Service cost for 2021 was $85,000. Plan assets (fair value) increased during the year by $46,000. The amount of the PBO at December 31, 2021, was:

Answer 1

The correct answer is $339,480.

Step-by-step explanation:

According to the scenario, the computation of the given data are as follows:

We can calculate the PBO at Dec.31 by using following formula:

PBO Dec.31 = PBO on Jan 1,2021 + Service cost + Interest - pension benefits paid

Where, Interest = 11 % × $268,000 = $29,480

By putting the value we get

PBO, Dec.31 = $268,000 + $85,000 + $29,480 - $43,000

= $339,480