Question

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

Service cost $40,600
Contribution to the plan 9,600
Actual and expected return on plan assets 10,800
Benefits paid 19,800
Plan assets at January 1, 2020 105,300
Accumulated postretirement benefit obligation at January 1, 2020 347,700
Discount rate 8 %

Required:
Prepare a worksheet inserting January 1, 2017, balances, showing December 31, 2017, balances, and the journal entry recording postretirement benefit expense.

Answer 1

Answer and Explanation:

The Preparation of worksheet and the Journal entry is shown below:-

Interest on accumulated post retirement Benefit obligation = 347,700 × 8%

= $27,816

Oriole Co.

Pension worksheet - 2020

General Journal entries

Items Annual post retirement Cash Post-retirement Expenses Assets/Liability

Balance 1, 2020 $242,400 Cr.

($347,700 - $105,300)

Service cost $40,600 Dr.

Interest Cost * $27,816 Dr.

Actual return $10,800 Cr.

Contribution $9,600 Cr.

Journal entry for

2020 $57,616 Dr. $9,600 Cr. $48,016 Cr.

Balance Dec. 31,

2020 $290,416 Cr.

Memo Record

Items Accumulated Post retirement Plan assets

Benefit obligation

Balance 1, 2020 $347,700 Cr. $105,300 Dr.

Service cost $40,600 Cr.

Interest Cost * $27,816 Cr.

Actual return $10,800 Dr.

Contribution $9,600 Dr.

Benefits $19,800 Dr. $19,800 Dr.

Balance Dec. 31,

2020 $396,316 Cr. $105,900 Dr.

The Journal Entry is shown below:-

Annual post retirement expense Dr, $57,616

To Post retirement Assets/ Liability $48,016

To Cash $9,600

(Being post retirement benefit expense is recorded)

For recording the post retirement benefit expense we simply debited the annual post retirement expense as it is a expenses and we credited as it is reducing the amount.