Oberon Company provides postretirement health care benefits to employees who provide at least 10 years of service and reach the age of 65 while in service. On January 1 of the current year, the following plan-related data were available. Net loss–postretirement benefit plan $ 10,760,000 APBO balance $ 104,800,000 Fair value of plan assets none Average remaining service period to retirement 20 years Average remaining service period to full eligibility 15 years On January 1 of the current year, Oberon amended the plan to provide dental benefits. The actuary determines that the cost of making the amendment increases the APBO by $11,250,000. Management chooses to amortize this amount on a straight-line basis. The service cost is $68,000,000. The appropriate interest rate is 10%. Required: Calculate the postretirement benefit expense for the current year.
Oberon Company provides postretirement health care benefits to employees who provide at least 10 years of service and reach the age of 65 while in service. On January 1 of the current year, the following plan-related data were available. Net loss–postretirement benefit plan $ 10,760,000 APBO balance $ 104,800,000 Fair value of plan assets none Average remaining service period to retirement 20 years Average remaining service period to full eligibility 15 years On January 1 of the current year, Oberon amended the plan to provide dental benefits. The actuary determines that the cost of making the amendment increases the APBO by $11,250,000. Management chooses to amortize this amount on a straight-line basis. The service cost is $68,000,000. The appropriate interest rate is 10%. Required: Calculate the postretirement benefit expense for the current year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Oberon Company provides postretirement health care benefits to employees who provide at least 10 years of service and reach the age of 65 while in service. On January 1 of the current year, the following plan-related data were available.
| Net loss–postretirement benefit plan | $ | 10,760,000 | |
| APBO balance | $ | 104,800,000 | |
| Fair value of plan assets | none | ||
| Average remaining service period to retirement | 20 | years | |
| Average remaining service period to full eligibility | 15 | years | |
On January 1 of the current year, Oberon amended the plan to provide dental benefits. The actuary determines that the cost of making the amendment increases the APBO by $11,250,000. Management chooses to amortize this amount on a straight-line basis. The service cost is $68,000,000. The appropriate interest rate is 10%.
Required:
Calculate the postretirement benefit expense for the current year.
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