The EPBO for a particular employee on January 1, 2021, was $150,000. The APBO at the beginning of the year was $30,000. The appropriate discount rate for this postretirement plan is 5%. The employee is expected to serve the company for a total of 25 years with 5 of those years already served as of January 1, 2021. What is the APBO at December 31, 2021?

The APBO at December 31, 2021 is $37,800.

Explanation:

In order to calculate the ABPO at December 31, 2021 we have to use the following formula:

ABPO= EBPO as on December 31, 2021 × ratio period served over aquired

       = ($150,000 × 1.05) × 6 years

                                           25 years

       = $157,500× 6 years

                           25 years

      = $37,800.

The APBO at December 31, 2021 is $37,800.