Accounting for an OPEB Plan On January 1, 2007 Flash and Dash Company adopted a healthcare plan for its retired employees. To determine eligibility for benefits, the company retroactively gives credit to the date of hire for each employee. The following information is available about the plan:
|
Service cost |
$30,000 |
|
Accumulated postretirement benefit obligation (1/1/07) |
100,000 |
|
Accumulated postretirement benefit obligation for employees fully eligible to receive benefits (12/31/07) |
40,000 |
|
Expected return on plan assets |
0 |
|
Unrecognized prior service cost |
12,000 |
|
Payments to retired employees during 2007 |
5,000 |
|
Interest rate |
10% |
|
Average remaining service period of active plan participants (1/1/07) |
12 years |
Required
1. Compute the OPEB expense for 2007 if the company uses the average remaining service life to amortize the unrecognized prior service cost.
2. Prepare all the required journal entries for 2007 if the plan is not funded.