8 Southeast Technology provides postretirement health care benefits to employees

Question

8 Southeast Technology provides postretirement health care benefits to employees. On January 1, 2018,the following plan-related data were available: Pr ior service costror ig inated in 2013 Accunulated postret irement benef it obligation Fair va lue of plan assets Average renaining service period to ret irement Average rena ining service per iod to full eligibility ints 60 670 20 years (sane in previous 10 yrs.) 15 years (sone in previcus 10 yrs.) eBook On January 1, 2018, Southeast amends the plan in response to spiraling health care costs. The amendment establishes an annual maximum of $4,400 for medical benefits that the plan will provide. The actuary determines that the effect of this amendment is to decrease the APBO by $108,000. Management amortizes prior service cost on a straight-line basis. The Interest rate is 10%, The service cost for 2018 is $128,000. Pint Required: 1. Complete the below table to calculate the prior service cost amortization for 2018. 2. Complete the below table to calculate the postretirement benefit expense for 2018. Complete this question by entering your answers in the tabs below Required 1 Required 2 Complete the below table to calculate the prior service cost amortization for 2018 Prior service cost Negative prior service cost e period (years) Amortization Required 2

Explanation / Answer

Answer: a Complete the below table to calculate the prior service cost amortization for year 2018 Prior service cost $                        60,000.00 Less: Reduction for amendment $                      108,000.00 Negative prior service cost $                      (48,000.00) ($60,000-108,000) Service period to full eligibility (years) 15 Years Prior service cost amortization $                        (3,200.00) ($48,000/15) b Calculate the post retirement benefit expense for year 2018 Service cost $                      128,000.00 Add: Interest cost $                        67,000.00 ($670,000*10%) Less: Return on plan asset $                                        -   Add: Prior service cost amortization $                        (3,200.00) Post retirement expense $                      191,800.00

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