FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:Kingbird, Inc. is a furniture manufacturing company with 50 employees. Recently, after a long negotiation with the local labor union,
the company decided to initiate a pension plan as a part of its compensation plan. The plan will start on January 1, 2025. Each
employee covered by the plan is entitled to a pension payment each year after retirement. As required by accounting standards, the
controller of the company needs to report the pension obligation (liability). On the basis of a discussion with the supervisor of the
Personnel Department and an actuary from an insurance company, the controller develops the following information related to the
pension plan.
Average length of time to retirement
Expected life duration after retirement
Total pension payment expected each year after retirement
15 years
11 years
for all employees. Payment made at the end of the year.
$808,500 per year
The interest rate to be used is 10%.
Click here to view factor tables.
On the basis of the information above, determine the present value of the pension obligation (liability). (Round factor values to 5
decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
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