CBA Co. has established a defined benefit pension plan for its employees. Annual payments under the pension plan are equal to 2% of an employee's highest lifetime salary multiplied by the number of years with the company. As of the beginning of 2019, an employee had worked for the company for 10 years. The employee's salary in 2019 was P500,000. The employee is expected to retire in 25 years, and his salary increases are expected to average 3% per year during that period. The employee is expected to live for 15 years after retiring and will receive the first annual pension payment one year after retirement. The discount rate is 8% and the relevant present value (PV) and future value (FV) factors are as follows: PV of an ordinary annuity of 1 at 8% for 15 periods PV of 1 at 8% for 25 periods FV of 1 at 3% for 25 periods 8.559 0.146 2.094 What is the defined benefit obligation (DBO) on January 1, 2019?
CBA Co. has established a defined benefit pension plan for its employees. Annual payments under the pension plan are equal to 2% of an employee's highest lifetime salary multiplied by the number of years with the company. As of the beginning of 2019, an employee had worked for the company for 10 years. The employee's salary in 2019 was P500,000. The employee is expected to retire in 25 years, and his salary increases are expected to average 3% per year during that period. The employee is expected to live for 15 years after retiring and will receive the first annual pension payment one year after retirement. The discount rate is 8% and the relevant present value (PV) and future value (FV) factors are as follows: PV of an ordinary annuity of 1 at 8% for 15 periods PV of 1 at 8% for 25 periods FV of 1 at 3% for 25 periods 8.559 0.146 2.094 What is the defined benefit obligation (DBO) on January 1, 2019?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter19: Accounting For Post Retirement Benefits
Section: Chapter Questions
Problem 15E
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a. 100,000
b. 124,961
c. 209,400
d. 261,669
e. answer not given
Transcribed Image Text:CBA Co. has established a defined benefit pension plan for its employees. Annual
payments under the pension plan are equal to 2% of an employee's highest
lifetime salary multiplied by the number of years with the company. As of the
beginning of 2019, an employee had worked for the company for 10 years. The
employee's salary in 2019 was P500,000. The employee is expected to retire in
25 years, and his salary increases are expected to average 3% per year during
that period. The employee is expected to live for 15 years after retiring and will
receive the first annual pension payment one year after retirement.
The discount rate is 8% and the relevant present value (PV) and future value (FV)
factors are as follows:
PV of an ordinary annuity of 1 at 8% for 15 periods
PV of 1 at 8% for 25 periods
FV of 1 at 3% for 25 periods
8.559
0.146
2.094
What is the defined benefit obligation (DBO) on January 1, 2019?
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