Question

Pearsall company's defined benefit pension plan had a PBO of $265,000 on January 1, 2021. During 2021, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2021 was $80,000. Plan assets (fair value) increased during the year by $45,000. The amount of the PBO at December 31, 2021, was: Multiple Choice $225,000. $305,000. $331,500. None of these answer choices are correct.

Answer 1

$331,500

Step-by-step explanation:

Calculation for the amount of the PBO at December 31, 2021

PBO/1/1 $265,000

Add Service cost $80,000

Add Interest cost $26,500

($265,000 × 10%)

Less Benefits paid($40,000)

PBO 12/31 $331,500

Therefore the amount of the PBO at December 31, 2021 will be $331,500