Pension Plan Calculations Explained
What was the projected benefit obligation (PBO) at December 31, Year 1?
The projected benefit obligation (PBO) at December 31, Year 1 was $448,800.
The computation of the ending balance of PBO is as follows:
Beginning balance of PBO: $390,000
Add: Service cost: $92,000
Add: Interest ($390,000 × 12%): $46,800
Less: Pension benefits paid: ($80,000)
Closing balance of PBO: $448,800
By following the above formula, we arrived at the ending balance of PBO.