Data pertaining to the postretirement health care benefit plan of Amazing Delive
ID: 2469822 • Letter: D
Question
Data pertaining to the postretirement health care benefit plan of Amazing Delivery Service include the following for the current calendar year:
Required:
1) Determine Amazing's postretirement benefit expense for the current year.
2) Prepare the journal entry to record the benefit expense for the current year.
7%
Service cost $100,000 APBO, January 1 $600,000 Plan assets (fair value), January 1 $40,000 Prior service cost none Retiree benefits paid (end of year) $75,000 Net gain (current year amortization, $500) $82,000 Contribution to health care fund (end of year) $172,000 Return on plan assets (actual and expected) 10% Discount rate7%
Explanation / Answer
1)
Determine Amazing's postretirement benefit expense for the current year:
Details
Amount
Discounting
Factor @7%
Discounted
Cash flows
Retirement benefits paid
(end of year)
$ 75,000
0.93458
$ 70,093.50
Contribution to health care fund
(end of year)
$ 172,000
0.87343
$ 150,229.96
Total
$ 220,323
2)
Prepare the journal entry to record the benefit expense for the current year:
Date
Account title & explanation
Debit
Credit
Salary expenses
$ 220,323.00
Retirement benefits paid
$ 70,093.50
contribution to health care fund
$ 150,229.96
Details
Amount
Discounting
Factor @7%
Discounted
Cash flows
Retirement benefits paid
(end of year)
$ 75,000
0.93458
$ 70,093.50
Contribution to health care fund
(end of year)
$ 172,000
0.87343
$ 150,229.96
Total
$ 220,323
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