At January 1, 2012, Wembley Company had plan assets of €250,000 and a defined benefit obligation of the same amount.During 2012, service cost was €27,500, the discount rate was 10%, actual and expected return on plan assets were €25,000, contributions were €20,000, and benefits paid were €17,500.Based on this information what would be the defined benefit obligation for Wembley Company for 2012?

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The defined benefit obligation at the beginning of the year was €250,000. The service cost for the year was €27,500. The benefits paid during the year reduce the obligation by €17,500, leaving a balance of €260,000. The expected return on plan assets of €25,000 is deducted from the obligation, bringing it down to €235,000. The contributions made during the year increase the plan assets to €270,000. Applying the discount rate of 10% to the obligation at the end of the year (€235,000) gives a present value of €258,500. Therefore, the defined benefit obligation at the end of the year is €258,500, which is closest to option B (€285,000).

At January 1, 2012, Wembley Company Had Plan Assets of €250,000