LeMond has 50 full time employees. Recently the company decided to initiate a pension plan as part of its employee compensation package. The pension plan will start on January 1, 2019. As required by accounting standards, the controller of the company needs to report the pension obligation (liability). The following estimates have been collected: Average length of time to retirement 15 years Expected life duration after retirement 10 years Total pension payment expected each year after retirement for all employees $800,000 annually On the basis of the information above, determine the present value of the pension liability. Assume the payment is made at the end of the year and the interest rate is 8 percent.
LeMond has 50 full time employees. Recently the company decided to initiate a pension plan as part of its employee compensation package. The pension plan will start on January 1, 2019. As required by accounting standards, the controller of the company needs to report the pension obligation (liability). The following estimates have been collected: Average length of time to retirement 15 years Expected life duration after retirement 10 years Total pension payment expected each year after retirement for all employees $800,000 annually On the basis of the information above, determine the present value of the pension liability. Assume the payment is made at the end of the year and the interest rate is 8 percent.
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 13E
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- LeMond has 50 full time employees. Recently the company decided to initiate a pension plan as part of its employee compensation package. The pension plan will start on January 1, 2019. As required by accounting standards, the controller of the company needs to report the pension obligation (liability). The following estimates have been collected:
Average length of time to retirement 15 years
Expected life duration after retirement 10 years
Total pension payment expected each year
after retirement for all employees $800,000 annually
On the basis of the information above, determine the present value of the pension liability. Assume the payment is made at the end of the year and the interest rate is 8 percent.
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