Assume that the pension benefit formula of ABC Corporation calls for paying a pension benefit of $250 per year for each year of service with the company plus 50% of the projected last years salary at retirement. Payments begin one year after the employee attains the age of 65 and are paid annually thereafter. The average life expectancy of employees is 76.

The pension plan is adopted on January 1, 2017. One of the companys employees, I.M. Workaholic, is granted credit for 10 years of prior service. He is 50 years old at the date the plan is adopted. His current annual salary is $20,000, but his salary level when he retires in 15 years is expected to be $30,000.

Assume a 10% rate of interest for both the discount rate and the expected rate of return on plan assets. Use the PV of 1, PVAD of 1, and PVOA of 1 tables where appropriate. (Use the appropriate factor(s) from the tables provided.)

Required:

1. Determine the PBO and ABO related to Workaholics pension benefits as of January 1, 2017.

1. What would the projected benefit obligation be on December 31, 2017?
2. How much pension expense should ABC Corporation recognize in 2017 for Workaholic? Show the components of pension expense.

1-a PVOA of expected pension benefits at date of retirement Projected benefit obligation (PBO) on 1/1/2017 1-b PVOA of expected pension benefits at date of retirement Accumulated benefit obligation (ABO) on 1/1/2017 2. PVOA of expected pension benefits at date of retirement Projected benefit obligation (PBO) on 12/31/2017) 3. Total pension expense for 2017