Chapter 17, Problem 17.14BE

Postretirement benefits; determine the APBO and service cost

• LO17–9, LO17–10

Prince Distribution Inc. has an unfunded postretirement benefit plan. Medical care and life insurance benefits are provided to employees who render 10 years service and attain age 55 while in service. At the end of 2018, Jim Lukawitz is 31. He was hired by Prince at age 25 (6 years ago) and is expected to retire at age 62. The expected postretirement benefit obligation for Lukawitz at the end of 2018 is $50,000 and $54,000 at the end of 2019. Calculate the accumulated postretirement benefit obligation at the end of 2018 and 2019 and the service cost for 2018 and 2019, as pertaining to Lukawitz.