Data pertaining to the postretirement health care benefit plan of Sterling Properties include the following for 2011

E 17-27 Postretirement benefits; components of postretirement benefit expense

Data pertaining to the postretirement health care benefit plan of Sterling Properties include the following for 2011:

Service cost 124
Accumulated postretirement benefit obligation, Jan 1 700
Prior service cost AOCI 50
Prior service cost AOCI none
Net gain AOCI (2011 amort, 1) 91
retiree benefits paid (end of year) 87
contribution to health care benefit fund (end of year) 185
Discount rate 7%

Required:
1. Determine the postretirement benefit expense for 2011.
2. Prepare the appropriate journal entries to record the postretirement benefit expense, funding, and retiree benefits for 2011.


Click here for the solution: Data pertaining to the postretirement health care benefit plan of Sterling Properties include the following for 2011

Gorky-Park Corporation provides postretirement health care benefits to employees who provide at least 12 years of service and reach age 62 while in service

Gorky-Park Corporation provides postretirement health care benefits to employees who provide at least 12 years of service and reach age 62 while in service. On January 1, 2011, following plan-related data were available

Accumulated postretirement benefit obligation 130
Fair value of plan assets none
Average remaining service period to retirement 25 years (same in previous 10 yrs)
Average remaining service period to full eligibility 20 years (same in previous 10 yrs)

On January 1, 2011, Gorky-Park amends the plan to provide certain dental benefits in addition to previously provided medical benefits. The actuary determines that the cost of making the amendment retroactive increases service cost for 2011 is $34 million. The interest rate is 8%.

Requirements
1. Calculate the postretirement benefit expense for 2011.
2. Prepare the journal entry to record the expense.


Click here for the solution: Gorky-Park Corporation provides postretirement health care benefits to employees who provide at least 12 years of service and reach age 62 while in service

The chapter talks about Delphi Company reducing its other postretirement benefits by approximately $500 million because of a change in the law

14-43 The chapter talks about Delphi Company reducing its other postretirement benefits by approximately $500 million because of a change in the law. The federal government will reimburse companies for prescription drug benefits that they provide to their employees who are of Medicare age. The reimbursement is 28% of all prescription drug benefits in excess of $250 per person per year, up to a maximum of $1,300 per person.

Required
a. Identify the process the company would use to identify the liability for postretirement drug benefits. Assume this was done prior to the new federal law. Identify the data the company would need to make the estimate. Identify how the auditor might audit the data.
b. Explain how the auditor would verify the $500 million reduction in liability due to the new federal law.

Click here for the solution: The chapter talks about Delphi Company reducing its other postretirement benefits by approximately $500 million because of a change in the law