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.