Homework SourseThe following information relates to a postretirement benefi
| The following information relates to a post-retirement benefit plan: |
| APBO beginning, $430mn |
| Plan assets beginning, $240mn |
| Net post-retirement benefit gain, beginning, $33mn |
| Amortization of net gain or loss is based on SL method, ten-year average remaining service period |
| Prior-service cost, initial amount, recognized four years ago, $60mn |
| Amortization of prior-service cost is based on SL method, ten-year average remaining service period |
| Service cost, $55mn |
| Discount rate, 7% |
| Expected rate of return, 8% |
| Actual return, $14mn |
| Change in estimated life expectancy caused a gain of $21mn, year-end |
| Funding contribution, $25mn |
| What amount will be reported in the ending balance sheet for post-retirement benefit liability? |
| A. $25.1mn |
| B. $190m |
| C. $240.1mn |
| D. $215.1mn |
| The following information relates to a post-retirement benefit plan: |
| APBO beginning, $430mn |
| Plan assets beginning, $240mn |
| Net post-retirement benefit gain, beginning, $33mn |
| Amortization of net gain or loss is based on SL method, ten-year average remaining service period |
| Prior-service cost, initial amount, recognized four years ago, $60mn |
| Amortization of prior-service cost is based on SL method, ten-year average remaining service period |
| Service cost, $55mn |
| Discount rate, 7% |
| Expected rate of return, 8% |
| Actual return, $14mn |
| Change in estimated life expectancy caused a gain of $21mn, year-end |
| Funding contribution, $25mn |
| What amount will be reported in the ending balance sheet for post-retirement benefit liability? |
| A. $25.1mn |
| B. $190m |
| C. $240.1mn |
| D. $215.1mn |
Solution
SOLUTION
Ending post-retirement benefit liability = $215.1mn
Given,
Service cost = 55mn
Actual return = 14mn
Acturial gain = 21mn
Funding = 25mn
Beginning post-retirement benefit liability = APBO beginning - Plan assets beginning
= 430 mn - 240 mn = 190mn
Interest cost = 430mn * 7% = 30.1 mn
Ending post-retirement benefit liability = Beginning post-retirement benefit liability + Service cost + Interest cost - Actual return - Acturial gain - Funding
= 190mn + 55mn +30.1mn - 14mn - 21mn - 25 mn
= 215.1mn
