Mary Abbott is a long-time employee of Love Enterprises, a manufacturer and distributor of farm implements. Abbott plans to retire on her 65th birthday, five years from January 1, 2017. Her salary at January 1, 2017 is $48,000 per year, and her projected salary for her last year of employment is $60,000.
Love Enterprises sponsors a defined benefit pension plan. It provides for an annual pension benefit equal to 60% of the employee's annual salary at retirement. Payments commence one year after the anniversary date of his or her retirement. The discount and earnings rate on plan assets is 8%. The average life expectancy for employees is 80.
Required:
1. Compute the PBO related to Abbott's pension benefits as of January 1, 2017.
2. Compute the ABO for the year ended December 31, 2017.