Recognition of Postretirement Benefits Post Corporation provides health care and dental insurance coverage for its retired employees.
Question:
Recognition of Postretirement Benefits Post Corporation provides health care and dental insurance coverage for its retired employees. Post currently has 5,000 employees. It estimates each employee will live for 20 years after retirement and that it will cost $4,000 per year to provide health care benefits for each retiree.
a. What is the total dollar amount per employee that Post expects to pay for postretirement benefits following the employee’s retirement?
b. Post Corporation wishes to include the cost of future benefits earned by employees in the current period as operating costs of the current period. Why is it not considered appropriate to wait until the employee retires and report the amount paid each period as compensation expense?
c. How should Post Corporation determine the amount to report as health care expense for the current period?
Step by Step Answer:
Financial Accounting A Decision Making Approach
ISBN: 9780471328230
2nd Edition
Authors: Thomas E. King, Valdean C. Lembke, John H. Smith