Question

Jones Company has a postretirement benefit (health care) plan for its employees. On January 1, 2014, the balance in the Accumulated postretirement benefit obligation account was $300 million. The assumed discount rate—for purposes of determining postretirement obligations and expenses—is 8%. Jones does not prefund postretirement benefits, so there are no plan assets. It created a $45 million prior service cost credit at the end of 2013 when the company modified the health care plan to reduce the maximum benefits paid to each employee. This amount is being amortized over 15 years. The service cost component of postretirement benefits for 2014 is $35 million.

Required:
1. Determine the amount of postretirement benefits cost for 2014.
2. If benefits paid to retirees totaled $64 million in 2014, determine the balance in the Accumulated postretirement benefit obligation account on December 31, 2014.



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  • CreatedSeptember 10, 2014
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