(Postretirement Benefit Worksheet) Hollenbeck Foods Inc. sponsors a postretirement medical and dental benefit plan for its employees. The following balances relate to this plan on January 1, 2012.
|
Plan assets |
$200,000 |
|
Expected postretirement benefit obligation |
820,000 |
|
Accumulated postretirement benefit obligation |
200,000 |
|
No prior service costs exist. |
As a result of the plan’s operation during 2012, the following additional data are provided by the actuary.
Service cost for 2012 is $70,000
Discount rate is 10%
Contributions to plan in 2012 are $65,000
Expected return on plan assets is $10,000
Actual return on plan assets is $15,000
Benefits paid to employees are $44,000
Average remaining service to full eligibility: 20 years
Instructions
(a) Using the preceding data, compute the net periodic postretirement benefit cost for 2012 by preparing a worksheet that shows the journal entry for postretirement expense and the year end balances in the related postretirement benefit memo accounts. (Assume that contributions and benefits are paid at the end of the year.)
(b) Prepare any journal entries related to the postretirement plan for 2012 and indicate the postretirement amounts reported in the financial statements for 2012.