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How much is the current service cost

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Question - PELLUCID CLEAR Co. agrees to provide lump-sum retirement benefits to employees equal to 6% of final salary for each year of service. Information on an employee is shown below:

Average annual salary level on January 1, 20x1 12,000,000

Average annual salary increase starting January 1, 20x2 and every year thereafter 3%

Average service lives before entitlement to retirement benefits (January 1, 20x1 to December 31, 20x5) 5 years

Discount rate per year 10%

Required - How much is the current service cost in 20x2?

a. 608,840

b. 618,724

c. 669,724

d. 553,492

Reference no: EM132758687

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