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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

a. 100,000
b. 124,961
c. 209,400
d. 261,669
e. answer not given

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?
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?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Annuity
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education