The EPBO for a particular employee on January 1, 2009, was $30,000. The APBO at the beginning of the year was $6,000. The appropriate discount rate for this postretirement plan is 5%. The employee is expected to serve the company for a total of twenty-five years with five of those years already served as of January 1, 2009. What is the APBO at December 31, 2009?

Question

Quizplus · Accepted Answer

We can use the following formula to calculate the APBO: APBO = EPBO - (EPBO - APBO) x (1 + r)^(n of service / n of total years) 
Plugging in the given values, we get: APBO = $30,000 - ($30,000 - $6,000) x (1 + 0.05)^(6/25) = $7,560. Therefore, the correct answer is (D).

The EPBO for a Particular Employee on January 1, 2009