Junior Ltd Employs Three Workers to Develop and Test Games

question 25

Multiple Choice

Junior Ltd employs three workers to develop and test games.The employees are currently earning $30 000 each and are expected to cease their employment in 20 years.At the end of their employment each employee is entitled to a lump sum payment equal to 10% of their final salary.Actuarial analysis suggests salaries will increase evenly at a rate of 5% per year over the 20 years.At the end of the 20 years Junior's undiscounted obligation is $477 593.Assuming an interest rate of 8%,calculate the obligation that would be recorded at the end of year 1 (rounded to the nearest dollar) .

• A) $5123
• B) $23 898
• C) $21 986
• D) $102 466

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Definitions:

Outstanding Shares

The total number of shares of a company's stock currently held by all its shareholders, including share blocks and restricted shares.

Issued Shares

The total number of shares that have been sold to and are held by shareholders.

Paid-In Capital

The amount of capital "paid in" by investors during common or preferred stock issuances, including the par value of the shares plus any amount paid in excess.

Par Value

A nominal value assigned to a share of stock in the corporation's charter, serving as the minimum price at which shares can be issued.