Accounting for an OPEB Plan
Response to the following problem:
On January 1, 2010, Flash and Dash Company adopted a healthcare plan for its retired employees. To determine eligibility for benefits, the company retroactively gives credit to the date of hire for each employee. The following information is available about the plan:
Service cost $ 30,000
Accumulated postretirement benefit obligation (1/1/10) 100,000
Accumulated postretirement benefit obligation for employees fully eligible
to receive benefits (12/31/10) 40,000
Expected return on plan assets 0
Prior service cost 100,000
Payments to retired employees during 2010 5,000
Interest rate 10%
Average remaining service period of active plan participants (1/1/10) 12 years
Required:
1. Compute the OPEB expense for 2010 if the company uses the average remaining service life to amortize the prior service cost.
2. Prepare all the required journal entries for 2010 if the plan is not funded.