Marick Inc has an unfunded postretirement health care benefit plan. Life insuran

Question

Marick Inc has an unfunded postretirement health care benefit plan. Life insurance and medical benefits are provided to emplyees who render 12 years of service and attain age 55 while in service to the company. At the end of 2013, Kendall Murphy is 35. She was hired by Marick Inc 5 years ago at age 30 and is expected to retire at 62. The expected postretirement benefit obligation for Kendall is $50,000 at the end of 2013 and $60,000 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 for Kendall Murphy. Show work!

Explanation / Answer

Expected postretirement benefit (PRB)is based on the probability of Kendall continuing in the service for 12 years.In year 0 it is 0/12 =0 , in year it is 1/12 and so on . After 12th year it is 12/12 =1

In 2013 PRB = 50000 = (5/12)*x

x = $120000

accumulated PRB at the end of 2013 = [(1+2+3+4+5)/12]*120000 = $150000

  accumulated PRB at the end of 2014 = [(1+2+3+4+5+6)/12]*120000 = $210000

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.