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:

Question

Quizplus · Accepted Answer

The PBO at the end of the year can be calculated as follows:

PBO (Jan. 1, 2016) = $265,000
Service cost = $80,000
Interest cost = ($265,000 + $0) × 10% = $26,500
Less: Benefits paid = ($40,000)
Plus: Actuarial gain (due to increase in plan assets) = $45,000

PBO (Dec. 31, 2016) = $331,500

Therefore, the correct answer is choice letter C, $331,500.

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