What is the projected benefit obligation on december

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Question - Gerard Company has established a defined benefit pension plan for a lone employee. Annual payments under the pension plan are equal to the employee's highest lifetime salary multiplied by 2% multiplied by number of years with the entity. On December 31, 2021, the employee had worked for Gerard Company for 10 years. The salary in 2021 was P475,000.

The employee is expected to retire in 25 years and the salary increases are expected to average 3% per year during that period. The employee is expected to live for 15 years after retiring and will receive the first annual pension payment one year after retirement.

The discount rate is 8%. The relevant present value and future value factors are:

Future value of 1 at 3% for 25 periods

2.094

PV of an ordinary annuity of 1 at 8% for 15 periods

8.559

PV of 1 at 8% for 25 periods

0.146

Required - What is the projected benefit obligation on December 31, 2021?

Reference no: EM133101996

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