Question

Alpha Company sponsors a defined benefit plan covering all employees. Benefits are based on years of...

Alpha Company sponsors a defined benefit plan covering all employees. Benefits are based on years of service and compensation levels at the time of retirement. Alpha’s December 31, 2020, trial balance included a project-ed benefit obligation balance of $983,000, adjusted for an actuarially determined pension loss due to projected changes in interest rates. Assuming service cost of $155,000, discount rate of 5% applicable during the year (prior to the change in rates), benefit payments of $118,000, and a January 1, 2020, balance of $840,000 for the PBO, what was the loss recorded on the PBO in 2020?

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Answer #1
Loss recorded on the PBO in 2020
Amount in $
PBO on December 31,2020       983,000
Less: Service Cost       155,000
Less: Interest Cost ( 840,000 x 5 % )          42,000
Add: Benefit Payment       118,000
Less: PBO on January 1,2020       840,000
Loss Recorded on PBO          64,000
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