A company's defined benefit pension plan had a PBO of $265,000 on January 1, 2009. During 2009, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2009 was $80,000. Plan assets (fair value) increased during the year by $45,000. The amount of the PBO at December 31, 2009, was:

Question

Quizplus · Accepted Answer

PBO at the beginning of the year = $265,000
Service cost for the year = $80,000
Interest cost for the year ($265,000 × 10%) = $26,500
Total before benefits paid = $371,500
Subtract benefits paid = $40,000
Add increase in plan assets = $45,000

PBO at the end of the year = $376,500

Therefore, the correct answer is choice C.

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