Three employees of the Horizon Distributing Company will receive annual pension payments from the company when they retire. The employees will receive their annual payments for as long as they live. Life expectancy for each employee is 15 years beyond retirement. Their names, the amount of their annual pension payments, and the date they will receive their first payment are shown below: Employee Tinkers Evers Chance Annual Payment $ 33,000 38,000 43,000 Required: 1. Compute the present value of the pension obligation to these three employees as of December 31, 2024. Assume a 9% interest rate. Date of First Payment 12/31/2027 12/31/2028 12/31/2029 2. The company wants to have enough cash invested at December 31, 2027, to provide for all three employees. To accumulate enough cash, they will make three equal annual contributions to a fund that will earn 9% interest compounded annually. The first contribution will be made on December 31, 2024. Compute the amount of this required annual contribution. Note: For all requirements, use tables, Excel, or a financial calculator. Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Employee 1. Tinkers 1. Evers 1. Chance 2. Amount of annual contribution PV
Three employees of the Horizon Distributing Company will receive annual pension payments from the company when they retire. The employees will receive their annual payments for as long as they live. Life expectancy for each employee is 15 years beyond retirement. Their names, the amount of their annual pension payments, and the date they will receive their first payment are shown below: Employee Tinkers Evers Chance Annual Payment $ 33,000 38,000 43,000 Required: 1. Compute the present value of the pension obligation to these three employees as of December 31, 2024. Assume a 9% interest rate. Date of First Payment 12/31/2027 12/31/2028 12/31/2029 2. The company wants to have enough cash invested at December 31, 2027, to provide for all three employees. To accumulate enough cash, they will make three equal annual contributions to a fund that will earn 9% interest compounded annually. The first contribution will be made on December 31, 2024. Compute the amount of this required annual contribution. Note: For all requirements, use tables, Excel, or a financial calculator. Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Employee 1. Tinkers 1. Evers 1. Chance 2. Amount of annual contribution PV
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter19: Accounting For Post Retirement Benefits
Section: Chapter Questions
Problem 13E
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Question
Transcribed Image Text:Three employees of the Horizon Distributing Company will receive annual pension
payments from the company when they retire. The employees will receive their annual
payments for as long as they live. Life expectancy for each employee is 15 years beyond
retirement. Their names, the amount of their annual pension payments, and the date
they will receive their first payment are shown below:
Annual
Employee Payment
Tinkers
$ 33,000
Evers
Chance
38,000
43,000
Date of First
Payment
12/31/2027
12/31/2028
12/31/2029
Required:
1. Compute the present value of the pension obligation to these three employees as
of December 31, 2024. Assume a 9% interest rate.
2. The company wants to have enough cash invested at December 31, 2027, to
provide for all three employees. To accumulate enough cash, they will make three
equal annual contributions to a fund that will earn 9% interest compounded
annually. The first contribution will be made on December 31, 2024. Compute the
amount of this required annual contribution.
Note: For all requirements, use tables, Excel, or a financial calculator. Do not round
intermediate calculations. Round your final answers to nearest whole dollar amount.
(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Employee
1. Tinkers
1. Evers
1. Chance
2. Amount of annual contribution
PV
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