Question

Generic Company sponsors an unfunded postretirement plan providing healthcare benefits. The following information relates to the current year's activity of Generic's postretirement benefit plan: Postretirement benefit expense $150 million Service cost $120 million Amortization of net gain–AOCI $10 million Prior service cost–AOCI none Retiree benefits paid (end of year) $30 million The interest cost for the year is: Group of answer choices $40 million $20 million $30 million $50 million

Answer 1

Answer: $40 million

Step-by-step explanation:

Based on the information given in the question, the interest cost for the year will be calculated as follows:

Interest cost = Postretirement benefit expense - Service cost + Amortization of net gain–AOCI

Interest cost = $150 million - $120 million + $10 million

Interest cost = $40 million