Question

Sage Co. provides the following information about its postretirement benefit plan for the year 2020.

Service cost $98,200
Prior service cost amortization 3,300
Contribution to the plan 55,700
Actual and expected return on plan assets 62,800
Benefits paid 36,200
Plan assets at January 1, 2020 723,300
Accumulated postretirement benefit obligation at January 1, 2020 764,200
Accumulated OCI (PSC) at January 1, 2020 107,900 Dr.
Discount rate 9 %
Compute the postretirement benefit expense for 2020.
Postretirement benefit expense = $

Answer 1

The postretirement benefit expense for 2020 can be calculated using the formula: Service cost + Interest cost - Expected return on plan assets + Amortization of prior service cost + Net actuarial gain or loss. Plugging in the given values, the postretirement benefit expense for 2020 is $99,052.

Step-by-step explanation:

The postretirement benefit expense for 2020 can be calculated by considering several components. The expense is composed of the service cost, prior service cost amortization, interest cost, expected return on plan assets, and the net actuarial gain or loss. To calculate the expense, we can use the following formula:

Postretirement benefit expense = Service cost + Interest cost - Expected return on plan assets + Amortization of prior service cost + Net actuarial gain or loss

Plugging in the given values:

• Service cost = $98,200
• Prior service cost amortization = $3,300
• Interest cost = ($764,200 - $107,900) * 9% = $60,352
• Expected return on plan assets = $62,800
• Amortization of prior service cost = $0 (assuming no changes in future years)
• Net actuarial gain or loss = $0 (assuming no changes in future years)

Substituting these values, the postretirement benefit expense for 2020 is:

Postretirement benefit expense = $98,200 + $60,352 - $62,800 + $3,300 + $0

Postretirement benefit expense = $99,052