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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Bluebird Company has an accumulated postretirement benefit obligation (prior service cost) of $500,000 at the beginning of the year, and the average remaining service life of its employees is 20 years. The service cost for the year is $5,000. Bluebird uses a discount rate of 8%. Given this information, calculate Bluebird’s postretirement benefit expense for the current year.

To determine

Calculate the amount of postretirement benefit expense of Company B for the current year.

Explanation

Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Calculate the amount of postretirement benefit expense of Company B for the current year as follows:

ParticularsAmount in ($)
Service cost5,000.
Add: Interest cost (1)40,000
Add: Amortization of any prior service cost (2)25,000
Postretirement benefit expenses$70,000

Table (1)

Working note (1):

Calculate the interest cost on accumulated postretirement benefit obligation...

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