12. The following data are for Guava Company\'s retiree health care plan for the

Question

12.

The following data are for Guava Company's retiree health care plan for the current calendar year.

What is the service cost to be included in the current year's postretirement benefit expense? (Round your answer to the nearest whole dollar.)

a) $3,000

b) $4,400

c) $3,270

d) $3,180

  Number of employees covered   5   Years employed as of January 1   4 (each)   Attribution period   20 years   EPBO, January 1   $60,000   EPBO, December 31   $65,400   Interest rate   9%   Funding and plan assets   None

Explanation / Answer

EPBO, December 31 = $65400

1/Attribution period = 1/20 = 0.05

Service Cost = $65400 * 0.05 = $3270

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