Mary Abbott is a long-time employee of Love Enterprises, a manufacturer and distributor of farm implements. Abbott

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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, 20X1. Her salary at January 1, 20X1, 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, 20X1.

2. Compute the ABO at January 1, 20X1.

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Financial Reporting And Analysis

ISBN: 9781260247848

8th Edition

Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer

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