Question

Louie 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, $117,000; benefits paid to retirees, $10,000; interest cost, $8,500. The discount rate applied by the actuary was 10%. What was the service cost for the year?

Answer 1

$33,500

Step-by-step explanation:

Beginning PBO. ?

Service cost. ?

Interest cost. 8,500

Retiree benefits paid. (10,000)

Ending PBO. $117,000

*PBO, 1/1 = $8,500/10% = $85,000

Therefore, beginning PBO = $85,000

**$117,000 + $10,000 - $8,500 - $85,000 = $33,500

Service cost = $33,500

Answer 2

Service cost 11,500

Step-by-step explanation:

Beginning PBO$107,000

Service cost $11,500

1nterest cost $8,500

Retiree benefits paid(10,000)

Ending PBO$117,000

PBO, 1/1 = $8,500/10% = $107,000

*$117,000 + $10,000 - $8,500 - $107,000 = $11,500

Therefore the service cost for the year is $11,500