Question

On January 1, 2016, Vasby Software Company adopted a healthcare plan for its retired employees. To determine eligibility for benefits, Vasby retroactively gives credit to the date of hire for each employee. The service cost for 2016 is $8,130. The plan is not funded, and the discount rate is 9%. All employees were hired at age 28 and become eligible for full benefits at age 58. Employee C was paid $6,950 for postretirement healthcare benefits in 2016. On December 31, 2016, the accumulated postretirement benefit obligation for Employees B and C were $73,520 and $40,160, respectively. Additional information on January 1, 2016, is as follows:

Employee Status	Age	Expected Retirement Age	Accumulated Postretirement Benefit Obligation
1. Employee	31	65	$9,900
2. Employee	55	65	88,800
3. Retired	67	—	44,400
			$143,100

Required:

1.	Compute the OPRB expense for 2016 if Vasby uses the average remaining service life to amortize the prior service cost.
2.	Prepare all the required journal entries for 2016 if the plan is not funded.

Answer 1

Solution:

Given that....