On September 1, 2006, Howe Corp. offered special termination benefits to employees who had reached the early retirement age specified in the company’s pension plan. The termination benefits consisted of lump-sum and periodic future payments. Additionally, the employees accepting the company offer receive the usual early retirement pension benefits. The offer expired on November 30, 2006. Actual or reasonably estimated amounts at December 31, 2006, relating to the employees accepting the offer are as follows:
- Lump-sum payments totaling $475,000 were made on January 1, 2007.
- Periodic payments of $60,000 annually for three years will begin January 1, 2008. The present value at December 31, 2006, of these payments was $155,000.
- Reduction of accrued pension costs at December 31, 2006, for the terminating employees was $45,000.
In its December 31, 2006 balance sheet, Howe should report a total liability for special termination benefits of