The EPBO for a particular employee on January 1, 2013, 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 25 years with 5 of those years already served as of January 1, 2013. What is the APBO at December 31, 2013?

Question

Quizplus · Accepted Answer

The APBO at the end of the year is calculated by adding the service cost for the year and the interest cost to the beginning APBO. The service cost is the EPBO divided by the total service years, which is $30,000 / 25 = $1,200. The interest cost is the beginning APBO multiplied by the discount rate, which is $6,000 * 0.05 = $300. Therefore, the APBO at December 31, 2013, is $6,000 + $1,200 + $300 = $7,500. However, the correct choice is $7,560, which suggests a calculation error or additional factors not considered in the basic calculation.

The EPBO for a Particular Employee on January 1, 2013