E20-21 Garner Inc. provides the followi... [FREE SOLUTION]

Chapter 20: E20-21 (page 1168)

Garner Inc. provides the following information related to its postretirement benefits for the year 2017. Accumulated postretirement benefit obligation at January 1, 2017 $710,000 Actual and expected return on plan assets 34,000 Prior service cost amortization 21,000 Discount rate 10% Service cost 83,000
Instructions Compute postretirement benefit expense for 2017.

Short Answer

Expert verified

The discount rate in a pension plan represents thefuture benefit of the moneyan employee will receive by taking adefined pension plan.It works on the principle of thetime value of money.

Step by step solution

Given the following amounts:

Particulars	Amount
Accumulated postretirement benefit obligation	$710,000
Actual and expected return on plan assets	$34,000
Prior service cost amortization	$21,000
Discount rate	10%
Service cost	$83,000

Computation of postretirement benefit expense for the year 2017.

Particulars	Amount
Service cost	$90,000
Add: Interest on accumulated postretirement benefit obligation $($ 760, 000 脳 9 %)$	$68,400
Less: Expected return on plan assets	$62,000
Add: Amortization of prior service cost	$3,000
Postretirement Expense for 2017	$99,400