Question

Imagine Publishers, Inc. sponsors a postretirement plan providing health care benefits. The following information relates to the current year's activity of Imagine's postretirement benefit plan:

Service cost...$120 million
Actual & expected return on plan assets...$30 million
Interest cost...$40 million
Amortization of net loss...$10 million
Amortization of prior service cost...$20 million
Retiree benefits paid (end of year)...$35 million

What is Imagine's postretirement benefit expense?

A) $140 million
B) $150 million
C) $160 million
D) $185 million

Answer 1

The postretirement benefit expense for Imagine Publishers, Inc. is $155 million.

Step-by-step explanation:

To calculate Imagine's postretirement benefit expense, we need to consider the different components. The postretirement benefit expense consists of the following:

1. Service cost: $120 million
2. Net Interest cost: $40 million (Interest cost - Expected return on plan assets)
3. Amortization of prior service cost: $20 million
4. Amortization of net loss: $10 million
5. Retiree benefits paid: $35 million

To find the total postretirement benefit expense, we add up all these components:

Total = Service cost + Net Interest cost + Amortization of prior service cost + Amortization of net loss - Retiree benefits paid

Substituting the values:

Total = $120 million + ($40 million) + $20 million + $10 million - $35 million = $155 million