The Maggie Company has a defined benefit pension plan for its employees. The following information pertains to the pension plan as of December 31, 2014:

The amount of the December 31, 2014, projected benefit obligation is

Question

The Maggie Company has a defined benefit pension plan for its employees. The following information pertains to the pension plan as of December 31, 2014:

The amount of the December 31, 2014, projected benefit obligation is

Quizplus · Accepted Answer

The projected benefit obligation (PBO) represents the present value of the pension benefits earned by the employees, using the projected future salaries as the basis for calculating the benefits. Based on the information given, the PBO as of December 31, 2014 is calculated as follows:
PBO = ($6,000 × 50) + ($4,500 × 30) + ($3,000 × 20) × 8
PBO = $300,000 + $135,000 + $60,000 × 8
PBO = $2,530,000

The Maggie Company Has a Defined Benefit Pension Plan for Its