Question

Data pertaining to the postretirement health care benefit plan of Sterling Properties include the following for 2018: ($ in 000s) Service cost $ 148 Accumulated postretirement benefit obligation, January 1 1,300 Plan assets (fair value), January 1 90 Prior service cost–AOCI none Net gain–AOCI (2018 amortization, $2) 106 Retiree benefits paid (end of year) 94 Contribution to health care benefit fund (end of year) 230 Discount rate, 6% Return on plan assets (actual and expected), 10% Required: 1. Determine the postretirement benefit expense for 2018. 2. Prepare the appropriate journal entries to record the postretirement benefit expense, funding, and retiree benefits for 2018.

Answer 1

Service cost	148
Interest cost (1300*6%)	78
Return on plan assets (90*10%)	(9)
Amortization of net gain	(2)
Postretirement benefit expense	$215

APBO = service cost + interest cost = 148 + 78 = $226

Journnal Entries	Debit	Credit
Postretirement benefit expense Plan Assets Amortization of net gain- OCI                         APBO (To record APBO)	215 9 2	226
Plan Assets            Cash (To record contribution to health care benefit)	230	230
APBO            Plan Assets (To record retirement benefits paid)	94	94