The following information relates to a post-retirement benefit plan: APBO beginn
ID: 2405992 • Letter: T
Question
The following information relates to a post-retirement benefit plan: APBO beginning, $430mn Plan assets beginning, $240mn Net post-retirement benefit gain, beginning, $33mn Amortization of net gain or loss is based on SL method, ten-year average remaining service period Prior-service cost, initial amount, recognized four years ago, $60mn Amortization of prior-service cost is based on SL method, ten-year average remaining service period Service cost, $55mn Discount rate, 7% Expected rate of return, 8% Actual return, $14mn Change in estimated life expectancy caused a gain of $21mn, year-end Funding contribution, $25mn What amount will be reported in the ending balance sheet for post-retirement benefit liability? A. $25.1mn B. $190m C. $240.1mn D. $215.1mn The following information relates to a post-retirement benefit plan: APBO beginning, $430mn Plan assets beginning, $240mn Net post-retirement benefit gain, beginning, $33mn Amortization of net gain or loss is based on SL method, ten-year average remaining service period Prior-service cost, initial amount, recognized four years ago, $60mn Amortization of prior-service cost is based on SL method, ten-year average remaining service period Service cost, $55mn Discount rate, 7% Expected rate of return, 8% Actual return, $14mn Change in estimated life expectancy caused a gain of $21mn, year-end Funding contribution, $25mn What amount will be reported in the ending balance sheet for post-retirement benefit liability? A. $25.1mn B. $190m C. $240.1mn D. $215.1mnExplanation / Answer
SOLUTION
Ending post-retirement benefit liability = $215.1mn
Given,
Service cost = 55mn
Actual return = 14mn
Acturial gain = 21mn
Funding = 25mn
Beginning post-retirement benefit liability = APBO beginning - Plan assets beginning
= 430 mn - 240 mn = 190mn
Interest cost = 430mn * 7% = 30.1 mn
Ending post-retirement benefit liability = Beginning post-retirement benefit liability + Service cost + Interest cost - Actual return - Acturial gain - Funding
= 190mn + 55mn +30.1mn - 14mn - 21mn - 25 mn
= 215.1mn
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