Prince Distribution Inc. has an unfunded postretirement benefit plan. Medical ca
ID: 2452255 • Letter: P
Question
Prince Distribution Inc. has an unfunded postretirement benefit plan. Medical care and life insurance benefits are provided to employees who render 10 years service and attain age 55 while in service. At the end of 2013, Jim Lukawitz is 33. He was hired by Prince at age 29 (4 years ago) and is expected to retire at age 62. The expected postretirement benefit obligation for Lukawitz at the end of 2013 is $42,000 and $48,000 at the end of 2014. Calculate the accumulated postretirement benefit obligation at the end of 2013 and 2014 and the service cost for 2013 and 2014 as pertaining to Lukawitz.
Explanation / Answer
Attribution Period = (55-29) = 26 Year
Accumulated postretirement benefit obligation at the end of 2013 = EPBO*4/26
Accumulated postretirement benefit obligation at the end of 2013 = 42000*4/26
Accumulated postretirement benefit obligation at the end of 2013 = $ 6462
Accumulated postretirement benefit obligation at the end of 2014 = EPBO*5/26
Accumulated postretirement benefit obligation at the end of 2014 = 48000*5/26
Accumulated postretirement benefit obligation at the end of 2014 = $ 9231
Service cost for 2013 = EPBO*1/26
Service cost for 2013 = 42000*1/26
Service cost for 2013 = 1615
Service cost for 2014 = EPBO*1/26
Service cost for 2014 = 48000*1/26
Service cost for 2014 = 1846
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