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The following data are available pertaining to Household Appliance Company's retiree health care plan for 2021: Number...

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Accounting

The following data are available pertaining to HouseholdAppliance Company's retiree health care plan for 2021:

Number of employees covered2
Years employed as of January 1, 20212[each]
Attribution period25years
Expected postretirement benefit obligation, Jan. 1$63,000
Expected postretirement benefit obligation, Dec. 31$66,150
Interest rate5%
Fundingnone


Required:
1. What is the accumulated postretirement benefitobligation at the beginning of 2021?
2. What is interest cost to be included in 2021postretirement benefit expense?
3. What is service cost to be included in 2021postretirement benefit expense?
4. Prepare the journal entry to record thepostretirement benefit expense for 2021.

Answer & Explanation Solved by verified expert
3.9 Ratings (551 Votes)

1)
Accumulated PBO at the beginning
           = Expected PBO Jan.1 x Years Employed / Attribution Period
           =   $ 63,000 x 2 /25		 $ 5,040
2)
Interest cost
             = Accumulated PBO x Interest rate
             =   $ 5,040 x 5%		 $ 252
3)
Service cost
             = Expected PBO Dec. 31 x Total Years / Attribution Period
              =   $ 66,150 x 1 / 25		 $ 2,646
Date General Journal Debit Credit
1 Postretirement benefit expense
( $ 252 + $ 2,646 )		 $ 2,898
                     Postretirement benefit liability $ 2,898
(To record the Postretirement benefit expense )

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