Question

Garner Inc. provides the following information related to its postretirement benefits for the year 2017. Accumulated postretirement benefit obligation at January 1, 2017 $710,000 Actual and expected return on plan assets 34,000 Prior service cost amortization 21,000 Discount rate 10% Service cost 83,000

Instructions Compute postretirement benefit expense for 2017.

Short answer

The discount rate in a pension plan represents thefuture benefit of the moneyan employee will receive by taking adefined pension plan.It works on the principle of thetime value of money.

Step-by-step solution

Given the following amounts:

Particulars	Amount
Accumulated postretirement benefit obligation	$710,000
Actual and expected return on plan assets	$34,000
Prior service cost amortization	$21,000
Discount rate	10%
Service cost	$83,000

Computation of postretirement benefit expense for the year 2017.

Particulars	Amount
Service cost	$90,000
Add: Interest on accumulated postretirement benefit obligation$\left(\mathbf{\$}\mathbf{760}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{9}\mathbf{\%}\right)$	$68,400
Less: Expected return on plan assets	$62,000
Add: Amortization of prior service cost	$3,000
Postretirement Expense for 2017	$99,400