Rachel Company has established a defined benefit pension plan for its employees. Annual payments under the pension plan are equal to 3% of an employee’s highest lifetime salary multiplied by the...

Rachel Company has established a defined benefit pension plan for its employees. Annual payments under the pension plan are equal to 3% of an employee’s highest lifetime salary multiplied by the number of years with the entity. An employee’s salary in 2021 was P300,000. The employee is expected to retire in 10 years and the salary increases are expected to average 4% per year during that period. On December 31, 2021, the employee has worked for 12 years. The appropriate discount rate is 10% and the employee is expected to live for 5 years after retirement.