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Chapter 20: Question 4ISTQ (page 1192)

At January 1, 2017, Wembley Company had plan assets of \(250,000 and a defined benefit obligation of the same amount. During 2017, service cost was \)27,500, the discount rate was 10%, actual return on plan assets was \(25,000, contributions were \)20,000, and benefits paid were \(17,500. Based on this information, what would be the defined benefit obligation for Wembley Company at December 31, 2017? (a) \)277,500. (c) \(27,500. (b) \)285,000. (d) $302,500.

Short Answer

Expert verified

A deduction is a term used when the organization deducts a certain amount in the name of a pension premium from the defined pension plan of an employee.

Step by step solution

01

Correct answer.

Option (b) $285,000 is the correct answer.

02

Calculation

Particulars

Amount

Defined benefit obligation at the beginning

$250,000

Add: Service cost

$27,500

Add: Interest cost ($250,000×10%)

$25,000

Less: Benefits paid

$17,500

Defined benefit obligation at the end

$285,000

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Most popular questions from this chapter

Andrews Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2017 are as follows. Future Employee Years of Service Jim 3 Paul 4 Nancy 5 Dave 6 Kathy 6 On January 1, 2017, the company amended its pension plan, increasing its projected benefit obligation by $72,000. Instructions Compute the amount of prior service cost amortization for the years 2017 through 2022 using the years-of-service method, setting up appropriate schedules.

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Instructions Compute postretirement benefit expense for 2017.
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