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PBO calculations; ABO calculations; present value concepts
• LO17–1, LO17–2, LO17–3
1.2% × Service years × Final year’s salary
Stanley Mills was hired by Clark at the beginning of 1999. Mills is expected to retire at the end of 2043 after 45 years of service. His retirement is expected to span 15 years. At the end of 2018, 20 years after being hired, his salary is $80,000. The company’s actuary projects Mills’s salary to be $270,000 at retirement. The actuary’s discount rate is 7%.
Required:
1. Estimate the amount of Stanley Mills’s annual retirement payments for the 15 retirement years earned as of the end of 2018.
2. Suppose Clark’s pension plan permits a lump-sum payment at retirement in lieu of annuity payments. Determine the lump-sum equivalent as the present value as of the retirement date of annuity payments during the retirement period.
3. What is the company’s projected benefit obligation at the end of 2018 with respect to Stanley Mills?
4. Even though pension accounting centers on the PBO calculation, the ABO still must be disclosed in the pension disclosure note. What is the company’s accumulated benefit obligation at the end of 2018 with respect to Stanley Mills?
5. If we assume no estimates change in the meantime, what is the company’s projected benefit obligation at the end of 2019 with respect to Stanley Mills?
6. What portion of the 2019 increase in the PBO is attributable to 2019 service (the service cost component of pension expense) and to accrued interest (the interest cost component of pension expense)?
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Chapter 17 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
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- Question 13 of 20 View Policies Service cost Interest on projected benefit obligation Interest on vested benefits Amortization of prior service cost due to increase in benefits Actual return on plan assets O $945000. O $850000. O $660000. O $725000. $460000 295000 125000 65000 95000 -/1 If the actual return equals the expected return on plan assets, the amount of pension expense to be reported for 2026 isarrow_forwardQuestion 5 "For the last 8 years, an engineer has saved $800 every 6 months for the repairs agreement. What is the equal amount after the last payment, if the interest rate 8% per year compounded quarterly?" 24589 O 8559 O 15327 O 37265 O 54613 78355 110848 None of them 00000000arrow_forward1 How much interest is earned at 2-% if an amount of P10,500 was invested on October 3, 2021 and will mature on June 3, 2022? A P10,675 B P174.76 (C) P1,750 D P175arrow_forward
- Question 16 of 20 View Policies Current Attempt in Progress O $12960. O $12800. O $25600. O $11800. eTextbook and Media - /3 Save for Later On January 1, 2022, Crane Corp. purchased equipment for $64000. It was expected to last 5 years, after which it will be sold for $5000. It is expected to be used for a total of 11000 machine hours, and was used for 840 hours during the year ended December 31, 2022. The depreciation expense for 2022 using the double diminishing-balance method will be = Attempts: 0 of 1 used COP : Submit Answer 50:57arrow_forward69 4,347 At the beginning of 2020, your company buys a $32,400 piece of equipment that it expects to use for 4 years. The equipment has an estimated residual value of 6,000. The company expects to produce a total of 200,000 units. Actual production is as follows: 43,000 units in 2020, 53,000 units in 2021, 46,000 units in 2022, and 58,000 units in 2023. Required: a. Determine the depreciable cost. b. Calculate the depreciation expense per year under the straight-line method. c. Use the straight-line method to prepare a depreciation schedule. d. Calculate the depreciation rate per unit under the units-of-production method. e. Use the units-of-production method to prepare a depreciation schedule. Complete this question by entering your answers in the tabs below. Required A Required B Required C Determine the depreciable cost. Depreciable Cost 18 C Required D 39000 PELANCON Next > Aarrow_forwardAccounting Question 4. Today is Mr. Wang's 30th birthday. He plans to retire on his 65th birthday. Assuming that Mr. Wang will deposit $20000 into the investment account at the beginning of each month from today, the account will earn an actual return of 4.9070208% every year in the first 15 years and 4.8% every year and interest every month in the next 20 years. The first contribution is paid today and the last contribution is paid one month before the day of retirement on your 65th birthday. a) Try to find an account balance on your 65th birthday b) Try to calculate total interest earned c) Try to calculate the total single interest d) Try to calculate compound interestarrow_forward
- What interest was earned if P500 500 is invested at 10 1/2% from October 20, 2019 to March 20, 2020? A P22 042.85 B P522 396.88 C) P21 896.88 D) P479 520.96arrow_forwardNew PhilHealth Contribution Table 2021 P10,000.00 P350.00 2021 3.50% P350.00 to P2,450.00 P10,000.01 to P69,999.99 P70,000.00 P2,450.00arrow_forwardnt question Q1. Find the present value of 30 annual payments of $2,000 per annum where the first payment is made 14 years from now. So there are 30 annual payments from t=14 to t=43 inclusive. The discount rate is 5% pa. The present value of these payments is: Question 8Select one: a. $4,908.18 b. $16,304.68 c. $21,212.85 d. $30,282.15 e. $30,744.9arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
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