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The following data are for Guava Company's retiree health care plan for the current calendar year. Number of employees covered 5 Years employed as of January 1 4 (each) Attribution period 20 years EPBO, January 1 $ 60,000 EPBO, December 31 $ 63,600 Interest rate 6 % Funding and plan assets None What is the correct entry to record postretirement benefit expense for the current year

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Parrain

Answer:

Date                   Account Title                                         Debit          Credit

December 31    Postretirement benefit expense       $3,900

                           APBO                                                                       $3,900

Explanation:

Service cost = Ending EPBO / Attribution period

= 63,600 / 20

= $‭3,180‬

Interest cost = Beginning EPBO * Years employed / Attribution period * Interest rate

= 60,000 * 4/20 * 6%

= $‭720‬

Postretirement benefit expense = 3,180 + 720

= $3,900

Credit to Accumulated Postretirement Benefit Obligation (APBO).

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