Question

At January 1, 2017, Wembley Company had plan assets of \(250,000 and a defined benefit obligation of the same amount. During 2017, service cost was \)27,500, the discount rate was 10%, actual return on plan assets was \(25,000, contributions were \)20,000, and benefits paid were \(17,500. Based on this information, what would be the defined benefit obligation for Wembley Company at December 31, 2017? (a) \)277,500. (c) \(27,500. (b) \)285,000. (d) $302,500.

Short answer

A deduction is a term used when the organization deducts a certain amount in the name of a pension premium from the defined pension plan of an employee.

Step-by-step solution

Correct answer.

Option (b) $285,000 is the correct answer.

Calculation

Particulars	Amount
Defined benefit obligation at the beginning	$250,000
Add: Service cost	$27,500
Add: Interest cost ($\$250,000\times 10\%$)	$25,000
Less: Benefits paid	$17,500
Defined benefit obligation at the end	$285,000