Question

The following information relates to a post-retirement benefit plan: APBO beginning, $430mn Plan assets beginning, $240mn...

The following information relates to a post-retirement benefit plan:
APBO beginning, $430mn
Plan assets beginning, $240mn
Net post-retirement benefit gain, beginning, $33mn
Amortization of net gain or loss is based on SL method, ten-year average remaining service period
Prior-service cost, initial amount, recognized four years ago, $60mn
Amortization of prior-service cost is based on SL method, ten-year average remaining service period
Service cost, $55mn
Discount rate, 7%
Expected rate of return, 8%
Actual return, $14mn
Change in estimated life expectancy caused a gain of $21mn, year-end
Funding contribution, $25mn
What amount will be reported in the ending balance sheet for post-retirement benefit liability?
A. $25.1mn
B. $190m
C. $240.1mn
D. $215.1mn

Homework Answers

Answer #1

SOLUTION

Ending post-retirement benefit liability = $215.1mn

Given,

Service cost = 55mn

Actual return = 14mn

Acturial gain = 21mn

Funding = 25mn

Beginning post-retirement benefit liability = APBO beginning - Plan assets beginning

= 430 mn - 240 mn = 190mn

Interest cost = 430mn * 7% = 30.1 mn

Ending post-retirement benefit liability = Beginning post-retirement benefit liability + Service cost + Interest cost - Actual return - Acturial gain - Funding

= 190mn + 55mn +30.1mn - 14mn - 21mn - 25 mn

= 215.1mn

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