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E20-22

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Intermediate Accounting (Kieso)
Found in: Page 1168

Short Answer

Englehart Co. provides the following information about its postretirement benefit plan for the year 2017. Service cost $ 90,000 Prior service cost amortization 3,000 Contribution to the plan 56,000 Actual and expected return on plan assets 62,000 Benefits paid 40,000 Plan assets at January 1, 2017 710,000 Accumulated postretirement benefit obligation at January 1, 2017 760,000 Accumulated OCI (PSC) at January 1, 2017 100,000 Dr. Discount rate 9% Instructions Compute the postretirement benefit expense for 2017.

Retirement is a term used when an employee reaches a certain age(as prescribed by the government) and is no longer eligible for employment. Pension is paid to these employees to manage their expenses.

See the step by step solution

Step by Step Solution

Step 1: Given the following amounts:

Particulars

Amount

Service cost

$90,000

Prior service cost amortization

$3,000

Contribution

$56,000

Actual and expected return on plan assets

$62,000

Benefits

$40,000

Plan assets Jan 1, 2017

$710,000

Accumulated postretirement benefit obligation

$760,000

Accumulated OCI

$100,000

Discount rate

9%

Step 2: Computation of postretirement benefit expense for the year 2017.

Particulars

Amount

Service cost

$90,000

Add: Interest on accumulated postretirement benefit obligation

$68,400

Less: Expected return on plan assets

$62,000

Add: Amortization of prior service cost

$3,000

Postretirement Expense in 2017

$99,400

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