FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.3% x service years * final
year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is
expected to retire at the end of 2044 after 35 years' service. Her retirement is expected to span 18 years. Davenport's
salary is $87,000 at the end of 2024 and the company's actuary projects her salary to be $265,000 at retirement. The
actuary's discount rate is 9%.
At the beginning of 2025, changing economic conditions caused the actuary to reassess the applicable discount rate. It
was decided that 10% is the appropriate rate.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Required:
Calculate the effect of the change in the assumed discount rate on the PBO at the beginning of 2025 with respect to
Davenport.
Note: Do not round intermediate calculations. Round your final answer to the nearest whole dollar.
The
on PBO is
gain
loss
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Transcribed Image Text:Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.3% x service years * final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of 2044 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $87,000 at the end of 2024 and the company's actuary projects her salary to be $265,000 at retirement. The actuary's discount rate is 9%. At the beginning of 2025, changing economic conditions caused the actuary to reassess the applicable discount rate. It was decided that 10% is the appropriate rate. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Calculate the effect of the change in the assumed discount rate on the PBO at the beginning of 2025 with respect to Davenport. Note: Do not round intermediate calculations. Round your final answer to the nearest whole dollar. The on PBO is gain loss
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