Question

The present value of vested benefits of employees at present pay levels is $7,000,000 and at...

The present value of vested benefits of employees at present pay levels is $7,000,000 and at future pay levels is $8,000,000. The present value of non-vested benefits of employees at present pay levels is $14,000,000 and at future pay levels is $16,000,000. What is the accumulated benefit obligation of this company

a.

$7,000,000
b.

$16,000,000
c.

$8,000,000
d.

$24,000,000
e.

$21,000,00
Business   Accounting   
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Homework Answers

Answer #1

Accumulated benefit Obligation (ABO) is the approximate amount of company's pension plan liability at a given point of time.

In ABO it is assumed that pension plan to be terminated immediately, so it doesn't consider any future salary hikes & non vested benefits as it is not payable today.

So ABO of the company = present value of vested benefits of employees at present pay levels i.e. $7,000,000

Option A is correct.

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