B is corrent. The projected benefit obligation is the actuarial present value of the pension obligation at the end of the period. Since there were no changes in actuarial estimates during the year, the end of period projected benefit obligation is computed as follows:| Projected benefit obligation, 1/1/Y2 | $72,000 | | Service cost | 18,000 | | Interest on projected benefit obligation (10% x $72,000) | 7,200 | | Benefit payments | (15,000) | | Pension benefit obligation, 12/31/Y2 | $82,200 |
Service cost and interest on the projected benefit obligation increase the projected benefit obligation; benefit payments decrease the projected benefit obligation.A is incorrect. The projected benefit obligation is the actuarial present value of the pension obligation at the end of the period. Since there were no changes in actuarial estimates during the year, the end of period projected benefit obligation is computed as follows:| Projected benefit obligation, 1/1/Y2 | $72,000 | | Service cost | 18,000 | | Interest on projected benefit obligation (10% x $72,000) | 7,200 | | Benefit payments | (15,000) | | Pension benefit obligation, 12/31/Y2 | $82,200 |
Service cost and interest on the projected benefit obligation increase the projected benefit obligation; benefit payments decrease the projected benefit obligation.C is incorrect. The projected benefit obligation is the actuarial present value of the pension obligation at the end of the period. Since there were no changes in actuarial estimates during the year, the end of period projected benefit obligation is computed as follows:| Projected benefit obligation, 1/1/Y2 | $72,000 | | Service cost | 18,000 | | Interest on projected benefit obligation (10% x $72,000) | 7,200 | | Benefit payments | (15,000) | | Pension benefit obligation, 12/31/Y2 | $82,200 |
Service cost and interest on the projected benefit obligation increase the projected benefit obligation; benefit payments decrease the projected benefit obligation.D is incorrect. The projected benefit obligation is the actuarial present value of the pension obligation at the end of the period. Since there were no changes in actuarial estimates during the year, the end of period projected benefit obligation is computed as follows:| Projected benefit obligation, 1/1/Y2 | $72,000 | | Service cost | 18,000 | | Interest on projected benefit obligation (10% x $72,000) | 7,200 | | Benefit payments | (15,000) | | Pension benefit obligation, 12/31/Y2 | $82,200 |
Service cost and interest on the projected benefit obligation increase the projected benefit obligation; benefit payments decrease the projected benefit obligation. |
