Lender Company provides postretirement health care benefits to employees who provide at least 10 years of service and reach the age of 65 while in service. On January 1 of the current calendar year, the following plan-related data were available.
On January 1 of the current year, Lender amends the plan to provide dental benefits. The actuary determines that the cost of making the amendment increases the APBO by $20,000,000. Management chooses to amortize this amount on a straight-line basis. The service cost is $40,000,000. The appropriate interest rate is 10%.
Required:
Calculate the postretirement benefit expense for the current year.
$$\begin{array} { l l }
\text { APBO balance } & \$ 150,000,000 \
\text { Fair value of plan assets } & \text { none } \
\text { Average remaining service period to retirement } & 25 \text { years } \
\text { Average remaining service period to full eligibility } & 20 \text { years }
\end{array}$$

Question

Lender Company provides postretirement health care benefits to employees who provide at least 10 years of service and reach the age of 65 while in service. On January 1 of the current calendar year, the following plan-related data were available.
On January 1 of the current year, Lender amends the plan to provide dental benefits. The actuary determines that the cost of making the amendment increases the APBO by $20,000,000. Management chooses to amortize this amount on a straight-line basis. The service cost is $40,000,000. The appropriate interest rate is 10%.
Required:
Calculate the postretirement benefit expense for the current year.
 $$\begin{array} { l l } 
\text { APBO balance } & \$ 150,000,000 \
\text { Fair value of plan assets } & \text { none } \
\text { Average remaining service period to retirement } & 25 \text { years } \
\text { Average remaining service period to full eligibility } & 20 \text { years }
\end{array}$$

Quizplus · Accepted Answer

The Answer of Lender Company provides postretirement health care benefits to employees who provide at least 10 years of service and reach the age of 65 while in service. On January 1 of the current calendar year, the following plan-related data were available.
On January 1 of the current year, Lender amends the plan to provide dental benefits. The actuary determines that the cost of making the amendment increases the APBO by $20,000,000. Management chooses to amortize this amount on a straight-line basis. The service cost is $40,000,000. The appropriate interest rate is 10%.
Required:
Calculate the postretirement benefit expense for the current year.
 $$\begin{array} { l l } 
\text { APBO balance } & \$ 150,000,000 \
\text { Fair value of plan assets } & \text { none } \
\text { Average remaining service period to retirement } & 25 \text { years } \
\text { Average remaining service period to full eligibility } & 20 \text { years }
\end{array}$$

Lender Company Provides Postretirement Health Care Benefits to Employees Who