The EPBO for a particular employee on January 1, 2013, 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 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. Service cost = (EPBO / total service years) = $150,000 / 25 = $6,000. Interest cost = beginning APBO * discount rate = $30,000 * 0.05 = $1,500. Therefore, APBO at December 31, 2013 = $30,000 + $6,000 + $1,500 = $37,500.

The EPBO for a Particular Employee on January 1, 2013