At the end of the current year, Eastern Electric received the following information from its actuarial firm:
Question:
At the end of the current year, Eastern Electric received the following information from its actuarial firm:
Pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,300,000
Postretirement benefits expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000
The pension plan is fully funded. Eastern Electric has funded only 40% of the nonpension postretirement benefits this year.
a. Prepare the journal entry to summarize pension expense for the entire year.
b. Prepare the journal entry to summarize the nonpension postretirement benefits expense for the entire year.
c. If the company becomes illiquid in future years, what prospects, if any, do today's employees have of receiving the pension benefits that they have earned to date?
d. Does the company have an ethical responsibility to fully fund its nonpension postretirement benefits?
Step by Step Answer:
a Pension Expense 2300000 Cash 2300000 To summarize payments to a fully funded pension plan b Postre...View the full answer
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078025778
17th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
