A company's defined benefit pension plan had a PBO of $265,000 on January 1, 2013. During 2013, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2013 was $80,000. Plan assets (fair value) increased during the year by $45,000. The amount of the PBO at December 31, 2013, was:

Question

Quizplus · Accepted Answer

The calculations needed are:

PBO (end of year) = PBO (beginning of year) + service cost + interest cost – benefits paid

PBO (end of year) = $265,000 + $80,000 + ($265,000 x 10%) - $40,000

PBO (end of year) = $331,500

Therefore, the correct answer is (C) $331,500.

A Company's Defined Benefit Pension Plan Had a PBO of $265,000