Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.6% x service years x final year's salary. payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of 2044 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $84,000 at the end of 2024 and the company's actuary projects her salary to be $250,000 at retirement. The actuary's discount rate is 6%. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1)
Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.6% x service years x final year's salary. payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of 2044 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $84,000 at the end of 2024 and the company's actuary projects her salary to be $250,000 at retirement. The actuary's discount rate is 6%. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1)
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 6E
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Transcribed Image Text:Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.6% x service years x final year's salary.
payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of
2044 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $84,000 at the end of 2024 and the
company's actuary projects her salary to be $250,000 at retirement. The actuary's discount rate is 6%.
Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1)
Required:
2. Estimate by the projected benefits approach the amount of Davenport's annual retirement payments earned as of the end of
2024.
3. What is the company's projected benefit obligation at the end of 2024 with respect to Davenport?
Note: Do not round intermediate calculations. Round your final answer to the nearest whole dollar.
4. If no estimates are changed in the meantime, what will be the company's projected benefit obligation at the end of 2027 (three
years later) with respect to Davenport?
Note: Do not round intermediate calculations. Round your final answer to the nearest whole dollar.
2. Annual retirement payments
3. Projected benefit obligation 2024
4. Projected benefit obligation 2027
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Step 1: Projected benefit obligation:
VIEWStep 2: (2) Estimate Davenport’s annual retirement payments earned as of the end of 2024:
VIEWStep 3: (3) Determine company’s projected benefit obligation at the end of 2027 with respect to Davenport:
VIEWStep 4: (4) Determine the company’s projected benefit obligation at the end of 2024 (three years later):
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