The following data are for Guava Company's retiree health care plan for the current calendar year.
- What is the correct entry to record postretirement benefit expense for the current year?
B) $$\begin{array} { | l | r | r | } \hline \text { Postretirement benefit expense } & 3,900 & \ \hline \text { Cash } & & 3,904\\hline \end{array}$$
C) $$\begin{array} { | l | c | c | } \hline \text { Postretirement benefit expense } & 4,000 & \ \hline \text { APBO } & & 4,000 \ \hline \end{array}$$
D) $$\begin{array} { | l | l | l | } \hline \text { Postretirement benefit expense } & 7,600 & \ \hline \text { APBO } & & 7,600\\hline \end{array}$$

Question

The following data are for Guava Company's retiree health care plan for the current calendar year. 
- What is the correct entry to record postretirement benefit expense for the current year?
B) $$\begin{array} { | l | r | r | } \hline \text { Postretirement benefit expense } & 3,900 & \ \hline \text { Cash } & & 3,904\\hline \end{array}$$ 
C) $$\begin{array} { | l | c | c | } \hline \text { Postretirement benefit expense } & 4,000 & \ \hline \text { APBO } & & 4,000 \ \hline \end{array}$$ 
D) $$\begin{array} { | l | l | l | } \hline \text { Postretirement benefit expense } & 7,600 & \ \hline \text { APBO } & & 7,600\\hline \end{array}$$

Quizplus · Accepted Answer

Service cost: $ \$ 63,600 \times 1 / 20 $$\quad$$\quad$$\quad$$\quad$$\quad$$3,180
Interest cost: $ \$ 60,000 \times 4 / 20 \times 6 \% $$\quad$$\quad$$\quad$=720
Postretirement benefit expense$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$43,900