The EPBO for a particular employee on January 1, 2009, was $150,000. The APBO at the beginning of the year was $30,000. 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

Using the formula: APBO = (EPBO - Plan Assets) / (1+r)^n
Where n represents the number of years remaining until employee retirement, which is 19 years as of 12/31/2009 (25 years total - 1 year served in 2009 - 5 years served prior to 2009).
Substituting the given values: 
APBO = ($150,000 - $0) / (1 + 0.05)^19
APBO = $42,805.76, which rounds to $42,800. Therefore, the correct answer is choice A.

The EPBO for a Particular Employee on January 1, 2009