Sandhill Foods Inc. sponsors a postretirement medical and dental benefit plan fo

Question

Sandhill 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 $200,400 Expected postretirement benefit obligation 819,600 Accumulated postretirement benefit obligation 200,400 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 $70,800 Discount rate is 10% Contributions to plan are $64,600 Expected return on plan assets is $10,200 Actual return on plan assets is $15,200 Benefits paid to employees are $44,400 Average remaining service to full eligibility: 20 years

SANDHILL FOODS INC. Postretirement Benefit Worksheet–2017 General Journal Entries Memo Record Annual Postretirement Expense Postretirement Asset/ Liability OCI–Gain/ Loss Cash APBO Plan Assets Items Balance, Jan. 1, 2017 Service cost Interest cost Actual return Unexpected gain Contributions Benefits Journal entry for 2017 Accumulated oCI, Dec. 31, 2016 Balance, Dec. 31, 2017

Explanation / Answer

Interest cost= opening APBO*rate= 200400*10%= 20040

Difference between actual return and expected return will go to OCI-Gain or loss

Items Annual post retirement expense Cash OCI-Gain/loss post retirement asset/liability APBO Plan assets Amount Dr/cr Amount Dr/cr Amount Dr/cr Amount Dr/cr Amount Dr/cr Amount Dr/cr Balance Jan 1.2017 0 Cr 200400 Cr 200400 Dr Service cost 70800 Dr 70800 Cr 70800 Cr Interest cost 20040 Dr 20040 Cr 20040 Cr Actual return 10200 Cr 5000 Cr 15200 Dr 15200 Dr Contributions 64600 Cr 64600 Dr 64600 Dr Benefits 44400 Dr 44400 Cr Jounal entry for 2017 Jounal entry for 2017 80640 Dr 64600 Cr 5000 Cr 11040 Cr Accummulated OCT dec 31.2016 0 Balance Dec 31.2017 5000 Cr 11040 Cr 246840 Cr 235800 Dr

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