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Mars Inc. has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $119,000; benefits paid to retirees, $11,500; interest cost, $7,500. The discount rate applied by the actuary was 10%. What was the beginning PBO?

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Answer:

The beginning PBO is equal to $ 75,000

Explanation:

Step 1. Condsider the following formula

Beginning PBO = Interest Cost / Discount rate

Step 2. Set the value of variables.          

= $ 7,500/10%

Step 3. Calculate.

  = $ 75,000

The beginning PBO is equal to $ 75,000

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