question archive A company's defined benefit pension plan had a PBO of $265,000 on January 1, 2016

A company's defined benefit pension plan had a PBO of $265,000 on January 1, 2016

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A company's defined benefit pension plan had a PBO of $265,000 on January 1, 2016. During 2016, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2016 was $80,000. Plan assets (fair value) increased during the year by $45,000. The amount of the PBO at December 31, 2016, was:

A. $225,000.

B. $305,000.

C. $331,500.

D. None of these answer choices is correct.

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Answer:

PBO/1/1 (Credit Balance)

$265,000

Service cost (Credit)

80,000

Settlement cost ($265,000 × 10%) (Credit)

26,500

 

Benefits paid (Debit)

(40,000)

PBO 12/31

$331,500