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, $110,000; benefits paid to retirees, $10,000; interest cost, $8,000. The discount rate applied by the actuary was 8%. What was the service cost for the year?

Question

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$\begin{array}{lc}
\text { Beginning PBO } & \$ 100,000* \
\text { Service cost } & 12,000** \
\text { Interest cost } & 8,000 \
\text { Retiree benefits paid } & (10,000) \
\hline \text { Ending PBO } & \$ 110,000 \
\hline
\end{array}$ *PBO, 1/1 = $8,000/8% = $100,000
**$110,000 + $10,000 ? $8,000 ? $100,000 = $12,000

Louie Company Has a Defined Benefit Pension Plan