Question

Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 16% x service years final year's salary. payable at the end of each year Angela Davenport was hired by Sachs at the beginning of 2007 and is expectéd to retire at the end of 2041 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $84,000 at the end of 2021 and the company's actuary projects her salary to be $250,000 at retirement. The actuary's discount rate is 6 % ( EV of $1. PV of $1. EVA of $1 PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What is the company's projected benefit obligation at the beginning of 2021 (after 14 years' service) with respect to Davenport? (Do not round intermediate calculations. Round your final answer to the nearest whole dolllar.) 2. Estimate by the projected benefits approach the portion of Davenport's annual retirement payments attributable to 2021 service. 3. What is the company's service cost for 2021 with respect to Davenport? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.) 4. What is the company's interest cost for 2021 with respect to Davenport? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.) 5. Combine your answers to requrements 1, 3, and 4 to determine the company's projected benefit obligation at the end of 2021 (after 15 years' service) with respect to Davenport. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)

Answer 1

Sachs Brands' Requirement 1 1.6% x 14 x $250,000 = $56,000 $56,000 x 10.8275* = $606,340 $606,340 x .29415** = $178,355 present value of an ordinary annuity of $1: n-18, i=6% (from Table 4) present value of $1: n=21, i=6% (from Table 2) Requirement 2 1.6% x 1 x $250,000 = $4,000 Requirement 3 $4,000 x 10.8275* = $43,310 $43,310 x .3118** - $13,504 present value of an ordinary annuity of $1: n-18, i=6% (from Table 4) present value of $1: n=20, i-6% (from Table 2) Requirement 4 $178,355 x 6%= $10,701 Requirement 5 PBO at the beginning of 2021 178355 Service cost: 13504 Interest cost: 10701 PBO at the end of 2021 202560