Accounting for an OPEB Plan On January 1, 2007 the Vasby Software 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 service cost for 2007 is $8,000. The plan is not funded, and the discount rate is 10%. All employees were hired at age 28 and become eligible for full benefits at age 58. Employee C was paid $7,000 for postretirement healthcare benefits in 2007. On December 31, 2007 the accumulated postretirement benefit obligation for Employees B and C were $77,000 and $41,500, respectively. Additional information on January 1, 2007 is as follows:
|
Employee Status |
Age |
Expected Retirement Age |
Accumulated Postretirement Benefit Obligation |
|
A Employee |
31 |
65 |
$14,000 |
|
B Employee |
55 |
65 |
70,000 |
|
C Retired |
67 |
— |
45,000 |
|
$129,000 |
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.