The following data are available pertaining to Household Appliance Company\'s re
ID: 2450511 • Letter: T
Question
The following data are available pertaining to Household Appliance Company's retiree health care plan for 2016: Number of employees covered 2 Years employed as of January 1, 2016 2 [each] Attribution period 25 years Expected postretirement benefit obligation, Jan. 1 $ 67,000 Expected postretirement benefit obligation, Dec. 31 $ 70,000 Interest rate 5 % Funding none
Required: 1. What is the accumulated postretirement benefit obligation at the beginning of 2016?
2. What is interest cost to be included in 2016 postretirement benefit expense?
3. What is service cost to be included in 2016 postretirement benefit expense?
4. Prepare the journal entry to record the postretirement benefit expense for 2016. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)
Explanation / Answer
1. Accumulated post retirement benefit obligation on 1.12016
Expected retirement obligation : 67,000
Attribution period 25 years
Accumulated retirement obligation @ 5 % = 19,785
(67,000 * .2953)
2. Interest cost @ 5 % on opening post benefit obligation 369
3.Service cost to be included in 2016 post retirement benefit expense
Expected obligation at year end 20,671
(70,000* .2953)
Service cost 517
(closing obligation - opening obligation - interest cost )
(20,671-19,785,369 )
4. Journal entry:
Pension expense 886
To retirement benefit obligation 886
(Being current year pension expense accumulated )
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