Chapter 17

Problem 17-10
Answer: A. 638,269
Solution:
Future salary (500,000x 1.217) 608,500

Annual Premium Payment (3%x608,500x 15) 273,825

x PV of Ordinary Annuity of 1 at 12% for 6 periods 4.111
Present Value, Dec. 31, 2025 1,125,695
Multiply by Pv of 1 @ 12% for 5 periods 0.567
PBO- December 31, 2020 638,269

Problem 17-11
Answer: D. 545,280
Solution
2020 (300,000x 0.826) 247,800
2021 (300,000x0.909) 272,800
2022 (300,000x1.000) 300,000
Total current Service cost 820,500

272,500
247,800x 0.10 24,780
297,280
+ 247,800
545,280

Problem 17-12
Solution:
1. A. 492,750
500,000 x 2.190 1,095,000

1,095,000x 3%x 15 492,750

2. B. 289,540
492,750 x 5.650 2,784,038
x 0.104
289,540
Problem 17-13
Solutions:
1. A. 480,960
800,000x 2%x 20 320,000

320,000x 10.02 3,206,400

x 0.15
480,960
2. B. 721,440
800,000x 3% x 20 480,000
480,000 x 10.02 4,809,600
X 0.15
721,440
3. C. 240,480
721,440
(480,960)
240,480

MCQS 17-14
1. B
2. B
3. C
4. D
5. B
6. C
7. C
8. A
9. B
10. A

MCQS 17-15
1. D
2. D
3. A
4. D
5. D
6. C
7. C
8. B
9. D
10. A

Chapter 18

Problem 18-9
Answer: 8,220,000
Solution:
PBO- January 1 7,200,000
Current service cost 1,800,000
Interest Cost (10% x 7,200,000) 720,000
Total 9,720,000
Less benefit paid 1,500,000
PBO- December 31 8,220,000

Problem 18-10
Answer: 700,000
Solution:
PV DBO
December 31 3,500,000 3,000,000 January 1
Benefits paid 500,000 300,000
700,000