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Chapter 20: E20-19 (page 1168)

Kreter Co. provides the following information about its postretirement benefit plan for the year 2017. Service cost $ 45,000 Contribution to the plan 10,000 Actual and expected return on plan assets 11,000 Benefits paid 20,000 Plan assets at January 1, 2017 110,000 Accumulated postretirement benefit obligation at January 1, 2017 330,000 Discount rate 8% Instructions Compute the postretirement benefit expense for 2017

Short Answer

Expert verified

Postretirement benefit expense is used when an organizationestimates the pension cost during a financial year.It strictly depends upon the type ofpension plantaken from the organization.

Step by step solution

01

Given the following amounts:

Particulars

Amount

Service cost

$45,000

Contribution

$10,000

Actual and expected return on plan assets

$11,000

Benefits

$20,000

Plan assets at Jan 1, 2017

$110,000

Accumulated postretirement benefit

$330,000

Discount rate

8%

02

Computation of postretirement benefit expense for the year 2017.

Particulars

Amount

Service cost

$45,000

Add: Interest on liability$330,000×8%

$26,400

Less: Actual and expected return on plan assets

$11,000

Postretirement benefit expense in 2017.

$60,400

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Most popular questions from this chapter

What are “liability gains and losses,” and how are they accounted for?

Hollenbeck Foods Inc. sponsors a postretirement medical and dental benefit plan for its employees. The following balances relate to this plan on January 1, 2017. Plan assets \(200,000 Expected postretirement benefit obligation 820,000 Accumulated postretirement benefit obligation 200,000 No prior service costs or OCI balances exist. As a result of the plan’s operation during 2017, the following additional data are provided by the actuary. Service cost is \)70,000 Discount rate is 10% Contributions to plan are \(65,000 Expected return on plan assets is \)10,000 Actual return on plan assets is \(15,000 Benefi ts paid to employees are \)44,000 Average remaining service to full eligibility: 20 years Instructions (a) Using the preceding data, compute the net periodic postretirement benefit cost for 2017 by preparing a worksheet that shows the journal entry for postretirement expense and the year-end balances in the related postretirement benefit memo accounts. (Assume that contributions and benefits are paid at the end of the year.) (b) Prepare any journal entries related to the postretirement plan for 2017 and indicate the postretirement amounts reported in the financial statements for 2017.

The following defined pension data of Rydell Corp. apply to the year 2017. Projected benefit obligation, 1/1/17 (before amendment) $560,000 Plan assets, 1/1/17 546,200 Pension liability 13,800 On January 1, 2017, Rydell Corp., through plan amendment, grants prior service benefi ts having a present value of 120,000 Settlement rate 9% Service cost 58,000 Contributions (funding) 65,000 Actual (expected) return on plan assets 52,280 Benefits paid to retirees 40,000 Prior service cost amortization for 2017 17,000 Instructions For 2017, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.

Using the information in E20-22, prepare a worksheet inserting January 1, 2017, balances, showing December 31, 2017, balances, and the journal entry recording postretirement benefit expense

Identify the five components that comprise pension expense. Briefly explain the nature of each component.
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