Bonita, Inc. is a furniture manufacturing company with 50 employees. Recently, after a long negotiation with the local labor union, the company decided to initiate a pension plan as a part of its compensation plan. The plan will start on January 1, 2025. Each employee covered by the plan is entitled to a pension payment each year after retirement. As required by accounting standards, the controller of the company needs to report the pension obligation (liability). On the basis of a discussion with the supervisor of the Personnel Department and an actuary from an insurance company, the controller develops the following information related to the pension plan. Average length of time to retirement Expected life duration after retirement Total pension payment expected each year after retirement for all employees. Payment made at the end of the year. The interest rate to be used is 15%. 15 years 10 years The present value of pension obligation (liability) $847,500 per year Click here to view factor tables. On the basis of the information above, determine the present value of the pension obligation (liability). (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
Bonita, Inc. is a furniture manufacturing company with 50 employees. Recently, after a long negotiation with the local labor union, the company decided to initiate a pension plan as a part of its compensation plan. The plan will start on January 1, 2025. Each employee covered by the plan is entitled to a pension payment each year after retirement. As required by accounting standards, the controller of the company needs to report the pension obligation (liability). On the basis of a discussion with the supervisor of the Personnel Department and an actuary from an insurance company, the controller develops the following information related to the pension plan. Average length of time to retirement Expected life duration after retirement Total pension payment expected each year after retirement for all employees. Payment made at the end of the year. The interest rate to be used is 15%. 15 years 10 years The present value of pension obligation (liability) $847,500 per year Click here to view factor tables. On the basis of the information above, determine the present value of the pension obligation (liability). (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Average length of time to retirement
Expected life duration after retirement
Total pension payment expected each year after retirement
for all employees. Payment made at the end of the year.
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Bonita, Inc. is a furniture manufacturing company with 50 employees. Recently, after a long negotiation with the local labor union, the
company decided to initiate a pension plan as a part of its compensation plan. The plan will start on January 1, 2025. Each employee
covered by the plan is entitled to a pension payment each year after retirement. As required by accounting standards, the controller of
the company needs to report the pension obligation (liability). On the basis of a discussion with the supervisor of the Personnel
Department and an actuary from an insurance company, the controller develops the following information related to the pension plan.
The interest rate to be used is 15%.
Click here to view factor tables.
15 years
10 years
The present value of pension obligation (liability) $
III
$847,500 per year
***
On the basis of the information above, determine the present value of the pension obligation (liability). (Round factor values to 5 decimal
places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
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